Equity Crowdfunding 101

Roy Morejon, President
Command Partners
www.commandpartners.com
Presented By:
Equity Crowdfunding
HQ Charlotte at Packard Place

Who am I?
● President @CommandPartners, A Top Marketing Agency for
Startups by Hubspot
● 2014, Best Place to Work in Charlotte
● 2015, #17 Fastest Growing Private Company in Charlotte
● Crowdfunded over 170 Successful Projects
● Raised over $65 Million in past 4+ years
● Featured in CNN, Entrepreneur, Forbes, AdWeek, SEJ, Fast
Company, Pando Daily, Yahoo! Tech, Crowdfund Insider
@RoyMorejon #HQCrowdfunding

What is Crowdfunding?
● Is the collective cooperation, attention and trust by people
who network and pool their money together, usually via the
Internet, in order to support efforts initiated by other people
or organizations.
● Use an online community to solicit pledges
● It uses word of mouth and wisdom of the crowd to generate
interest and pledges

There are 4 main types of crowdfunding;
1. Rewards,
2. Equity,
3. Donation,
4. Loans

● Is it a good fit?
● Video and Design
● Rewards that matter
● Realistic Funding Goal
● PR = People + Relationships
● Social Media Shares
● Stretch Goals
● Paid Media
● Friends and Family

Crowdfunding Stats
● In 2013, crowdfunding was a $7,000,000,000 industry
● In 2014, crowdfunding was a $16,200,000,000 industry
● $34.4 Billion in 2015
● Projections for 2016 are over $80 Billion!

What is Equity Crowdfunding?
● Investors receive equity in a company and (potentially)
receive a return on their investments in the form of the
company’s profits.
Accredited v. Non-Accredited Investors

Are You Accredited?
● To qualify as an Accredited Investor in the US, an individual
must meet one of the following criteria:
● A net worth exceeding $1 million (excluding their primary
residence equity), either individually or jointly with their
spouse
● If single, an annual individual income of more than $200,000
for each of the last two years
● If married, a joint annual income of $300,000 for each of the
last two years
● Serve as a partner, executive officer, director or similar role
in the company seeking investment

Are You Non-Accredited?
● Those that have a net worth (joint or individual) less than $1
million and have earned less than $200,000 annually
($300,000 including spouse) over the last two years.

The passage of the Jumpstart Our Business
Startups or JOBS Act in 2012 means that
Non-Accredited Investors can participate in
equity-based crowdfunding.

April 5, 2012 - Jumpstart Our Business
Startups Act (JOBS Act)
September 23, 2013 - General Solicitation
(Title II)
June 19, 2015 - Reg A+ (Title IV)
January 29, 2016 - Reg CF Rules Set
(Title III)
May 16, 2016 - Reg CF Launches

The JOBS Act
● Equity crowdfunding made legal in 2012 when President
Obama signed into law the JOBS Act
● Goal of Act was to reduce constrictive regulations, allowing
for the funding of small businesses by outside investors
● Five Titles, each addressing problems and challenges facing
startups and small businesses
● Titles II, III and IV directly impact equity crowdfunding

Title II
• Enacted in September 2013
• Streamlined communication and general
solicitation of Accredited Investors
• Before, investors could only be solicited through
private, in-person meetings with family, friends
and colleagues
• Now, companies can advertise their intent to
acquire funding for their projects, including
online and through social media

Crowdfunding Under Title II: Accredited Investor
Equity Crowdfunding
Benefits and Drawbacks
• No limit on the amount you can raise
• Can advertise online and solicit investors
• Most affordable JOBS Act provision to use
• Only accredited investors
• Additional legal requirements over a regular
private placement
• Hard to raise private money unless company is
revenue producing

Title III
• Enacted in October 2015, becomes legal to use
on May 16, 2016
• Opened equity crowdfunding to Non-Accredited
Investor participation
• Startups and small businesses can raise up to
$1M in a period of a year through crowdfunding
• Significant disclosures are required for
companies to help provide transparency

Title III
• Investors making <$100,000 per year can
invest the greater of $2,000 or 5% of annual
income
• Investors making >$100,000 per year can
invest up to 10% of their annual income
• During a 12-month period, the aggregate of
securities offered to an investor through
crowdfunding offerings may not exceed
$100,000

Crowdfunding Under Title III: True Equity
Crowdfunding
• Lots of restrictions on marketing - can only use
“tombstone” ads and must do all “marketing” on the
funding portal where the offering is, can’t really build a
crowd before launch - not legal under the rules
• Biggest issue other than cost - All or nothing offerings
like Kickstarter. If you set a goal, and don’t hit it, you
do not get anything. Given the up front cost of legal,
accounting, marketing, etc. this is very dangerous
• Requires “reviewed” financials if raising more than
$500K - expensive - not as expensive as audits.

Title IV
• Enacted June 2015
• Also referred to as Regulation A+ or the Mini-
IPO
• Grants exemptions from certain registration
requirements for small offerings for companies
that don’t exceed $50 million in a 12 month
period (increased from $5 million)
• Gives companies the option to submit a draft
offering statement for confidential review by the
SEC before the offering goes public

Title IV
• Breaks offerings into two tiers:
• Tier 1: Offerings up to $20 million in a 12 month
period
• Tier 2: Offerings up to $50 million in a 12 month
period
• Tier 2 Offerings subject to additional requirements,
including audited financial statements
• Non-Accredited Investors can annually invest in a Tier
2 offering up to 10% of their income or net worth,
whichever is greater

Crowdfunding Under Title IV: Regulation A+/The
Mini-IPO
• Can market and generally solicit and “Test The
Waters” before you go live
• Not “all or nothing” - keep whatever is raised
• Requires filings with the SEC and “qualification”
of the offering, which is expensive and time
consuming

Growing Your Company Through Crowdfunding In
Multiple Steps
1. Rewards-based campaign - cheapest to do -
proof of concept, raise some seed money and give
away none of your company
2. Title III equity campaign - If already successful
with rewards, this will be a logical next extension.
Build more brand ambassadors, bring in the next
round of up to $1M
3. Mini-IPO - Now that company is revenue
producing, capitalize on this and raise up to $50M
to take it to the next level.

Recap: Why Choose Equity Crowdfunding?
• Allows a company to publicly fundraise
• Everyone can contribute (230 Million
Americans)
• Low cost mass market funding option
• Customers become investors and, in
turn, evangelists

Planning and Executing a Crowdfunding Project
Using crowdfunding for seed
money requires a concrete plan
and strategy from start to finish

Picking a Platform: Consider the Following…
What tools/features does the platform offer?
What features do you need?
Consider branding, multimedia, donor
databases, additional fundraising events, tax-
deduction information and more

Does the platform have any restrictions?
• Some platforms have deadlines, project
approval requirements and restricted
access to donor information

Should you go with a platform that serves a
niche market?
• Depending on your project, a niche platform
may serve you best

Logistics
• Create a detailed timeline of everything your
campaign will require
• Consider requirements and regulations from
both your crowdfunding platform and the
SEC
• Determine what your costs will be, and set a
funding goal depending on your costs

Marketing & Outreach
Start building up steam and gathering your “crowd”
well before you plan to launch. You may want to…
• Assemble a social media presence to reach
backers beyond your network
• LinkedIn can be especially helpful here!
• Create a landing page where interested
investors can enter their email address for more
information
• Run email marketing campaigns with your email
list
• Create a strong pitch and reach out to the media

Managing a Campaign
A crowdfunding campaign is a full-time job - you can’t
“set it and forget it.” You’ll need to…
• Communicate and interact with your investors
regularly - Keep them informed by providing regular
campaign updates
• Go beyond your platform to reach investors - Use
social media and pitch journalists to reach more
investors; don’t rely on your funding platform alone
• Be flexible - crowdfunding campaigns can be wildly
unpredictable, so be willing to change your strategy
as needed

Communicating With Your Investors
• Create a communication strategy, including all content
• Use videos and multimedia to make a personal connection
with potential investors
• Use the right communication platform - it may be your
website, your crowdfunding campaign page, your social
media channels, emails or a combination
• Extend your reach beyond your network through social
media
• Create a strategy for follow up and investor relations once
your campaign is over
• Stay engaged with your investors throughout your entire
campaign

Command Partners helped build every aspect of
Digitzs’ equity crowdfunding campaign, including:
• Creating and designing a pitch deck for the
founders to use while meeting with investors
• Design and draft the materials for the campaign
on EquityNet, such as business models,
revenue projections, board member bios, etc.
• Writing the video script for the landing page and
investor page
• Developing the landing page and investor page
wireframes and create the design work

Command Partners led the PR initiatives for the
entire equity campaign, including:
• Drafting several press releases for the launch of
the EquityNet campaign and other milestones
• Reaching out to interested media partners about
the startup
• Spearheading the #LessWorkMoreLife initiative
that the founder of Digitzs brainstormed- the
goal was for people to share what they wanted
to do with the time they gained through using a
payment platform such as Digitzs

Command Partners served as the between Digitzs
and investors. This entailed:
• Reaching out to between 20-500 investors per
day on EquityNet, Crowdfunder and AngelList
• Scheduling meetings between investors and the
Digitzs founder
• Answering any questions about Digitzs that
investors may have

Overall, Command
Partners helped Digitzs
raise over $2.6 million

Roy Morejon, President
Command Partners
www.commandpartners.com
Presented By:
Crowdfunding Questions?
@RoyMorejon
Presented To:

Equity Crowdfunding 101

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