To Be Takei II, The Wrath of Crowdfunding C
Yesterday in Part B
- Examination of internet based equity, debt and rewards based funding paradigm known as Crowdfunding.
- Examination of categories; past market growth; future potential through global market penetration for internet capable devices.
- Examination of legislation; non-accredited vs accredited investor status; breakdown of non-accredited overhead costs.
- Examination of oversight and compliance; crowdfunding startups, 100 crowdfunded companies; crowdfunding roadmap; crowdfunding convention; the niche's; general market plays and conclusions.
As Rod Serling would have said: Tonight's offering, submitted for your approval... They were best friends and coworkers in the halcyon days of the mid 80's... when profits were rising, Keating & Milken were flying high and zestful youth was theirs. "It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us." - Dickens
The other night, this showed up in my inbox. I have been aware of Dawn's unfortunate journey to a stage IV metastatic colon cancer diagnosis since 2012. I have never been able to reconcile the tragedy when one so young is given a "dead man walking" prognosis. In an effort to meet their medical costs, one must applaud the ingenuity of her husband in utilizing a crowdfunding platform Gofundme.com, and so our fortunate journey for today begins... and now Part C of our feature presentation...
The Nattering One muses... Social Media communities such as Google+ (Gmail, Youtube), LinkedIn, Twitter, Facebook, AOL, Yahoo and Xing have their pros and cons. We see crowdfunding bringing a mixture of both to the table for mainstream social media and online communities.
Oversight & Compliance
To operate as a crowdfunding portal or website under FINRA requires principals and representatives passing the General Securities Representative - (Series 7 including the foreign modules) OR the Corporate Securities Limited Representative - (Series 62); AND the Equity Trader Limited Representative - (Series 55) tests.
AND your not getting away from the Series 7 as it is a corequisite exam that needs to be successfully completed in addition to the Uniform Combined State Law Examination - (Series 66) (NASAA) before a candidate can register with a state in which they intend to do business.
Securities and Exchange Commission (SEC) and Financial Intermediary Regulatory Authority (FINRA) registration is required and all crowdfunding sites must have accredited principles and representatives who are registered in each state they intend to solicit business from.
From the Forbes article: "It's not alright to market dreams and in reality sell unreliable products that may or may not be delivered."What is the differentiation from any other IPO, penny stock or equity investment offering from a dealer broker or FINRA advisor? Answer: None, whatsoever.
From the Slate article: "equity crowdfunding is destined to do little more than separate mom-and-pop investors from their savings."This is a bit extreme. In addition to the standard investment advisories: "caveat emptor"; past performance is not an indicator or guarantee of future performance; these non deposit investment products are not insured by the FDIC; being more apropo...
A balancing act needs to be struck by the SEC as crowdfunding's extensive registration and disclosure requirements may be too heavily regulated for businesses to use and too poorly regulated to protect mom and pop investors. And that might be a Herculean task with what the sausage stuffer's on the hill threw at them.
Work Your Own Corner
From the Slate article: "Those are insanely high capital costs-companies would be better off financing their operations with credit cards. (Just think of the reward points!)"
To put the current cost structure dynamic in perspective, underwriting fees for a large stock offering are in the 4% range and with <$100K crowdfunding costs between 12.9% and 39%, much like an Ancient astronaut theorist, we say YES!
Some credit cards might be better (and you get the airmiles). Fortunately, its a dynamic world and as markets change, so do regulations, and cost structures will follow. In the meantime, to get financial backing for an idea, a dream or donations for a good cause, where else would one go and garner such a wide market audience? The SBA? Angels? Vulture capitalists? Family & Friends? Accredited investor portals? Bank credit cards? Street corner with a a cup o pencils? or gold mine map, assay and vaporware prospectus?
Some credit cards might be better (and you get the airmiles). Fortunately, its a dynamic world and as markets change, so do regulations, and cost structures will follow. In the meantime, to get financial backing for an idea, a dream or donations for a good cause, where else would one go and garner such a wide market audience? The SBA? Angels? Vulture capitalists? Family & Friends? Accredited investor portals? Bank credit cards? Street corner with a a cup o pencils? or gold mine map, assay and vaporware prospectus?
The Tide is Turning
This hilarious 4 minute animated video demonstrates the frustration of pitching an idea to traditional funding sources: If Nicola Tesla pitched Silicon Valley VC's.
10/23/13 From Forbes: "A significant opportunity for Angels & VCs to leverage investment crowdfunding exists. In the past I watched long time angels and VCs publicly go to bat against crowdfunding, stating that they would never invest in a crowdfunded company.
Now, in the last 4-6 months as investment crowdfunding is growing rapidly with accredited investors on sites like Crowdfunder, the tone of most investors has changed. Some of these same investors who were previously skeptical, or even upset about crowdfunding, have made a 180 degree turn. And some are now bringing deals they invest in to sites like Crowdfunder for follow-on investment crowdfunding from other accredited investors & funds." - Chance Barnett, CEO of Crowdfunder
The Niches
From Steve Case's World Bank report intro: "These changes enable entrepreneurs to utilize social media and the web to offer rewards, ownership of a shared vision, or even equity stakes to potential investors." From the Slate article: "Crowdfunding won't significantly improve the supply of investment capital"...
The current cost dynamic along with the latter statement clearly reflect the obvious interests of the usual suspects re: Reg D non accredited vs accredited investor's. Both bring to light glaring gap's in equity funding options for the little guy and investing opportunities for John Q. Public. These niche's could be filled by this potentially disruptive technology. While helping to address a dearth of funding options, internet based crowdfunding could change the landscape of equity funding and investing.
Notable Crowdfunding Startups
ArtistShare (2003), ChipIn (2005), EquityNet (2005), Pledgie (2006), Sellaband (2006), IndieGoGo (2008), GiveForward (2008), FundRazr (2009), Kickstarter (2009), RocketHub (2009), Fundly (2009), GoFundMe (2010), Microventures (2010), Fundageek (2011) and Symbid(2011) 1st publicly held.
Crowdfunded Companies & Resources
A list from Entrepreneur of the top 100 crowdfunded companies. Some Crowdfunding resources include the Crowdfunding Roadmap and 3rd Annual Crowdfunding Convention and Bootcamp.
Crowdfunding Market Plays
Dawn's Medical Bill Fund
C2C CrowdFunding, Inc. - (CRWD)
Symbid - (SBID)
Facebook - (FB)
AOL Inc. - (AOL)
LinkedIn - (LNKD)
Twitter, Inc. - (TWTR)
Yelp - (YELP)
Yahoo! Inc. - (YHOO)
Groupon, Inc. - (GRPN)
Angie's List, Inc. - (ANGI)
Xing Ag Namen Akt - (XNGAF)
First Trust DJ Internet Index ETF - (FDN)
Footnotes:
These are developments which could effect numerous social media and internet related mutual funds, ETF's and stocks.
** With the advent of new broadband solutions, internet and smartphone penetration is growing. Figures are estimates from the World Bank and BI intelligence as of 2013. We estimate that there are just under 3 billion (1.5b with PC + 1.5b smartphone + .5b tablet * .85) with some form of internet access.
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