These slides were used by Devin Thorpe at Kickercon to provide training on investment crowdfunding. The presentation provides a summary of crowdfunding laws and a basic guide for how to raise money via crowdfunding.

1. Crowdfunding: Changing the
World for Good
Devin D. Thorpe
August 29, 2014
@devindthorpe

2. How big will crowdfunding
be in 2014?

3. $100 billion

4. A little
about me

5. Teton Dam

6. Crowdfunding will…
• Empower women and minorities
• Level the playing field for ordinary investors
• Facilitate growth in the developing world
– Enabling the developed world to invest in high
growth opportunities in emerging markets
– Allow impoverished individuals to raise small
amounts of capital for microenterprises

7. U.S. Securities Law
 Securities Act of 1933
 Securities Act of 1934
 JOBS Act (2012)

8. Securities Laws Before
2012
 No advertising or public announcements
No “General Solicitation”
 Private securities typically offered only to
rich investors
Most private securities transactions require
accreditation
Accredited investors have one of the following
$1 million net worth excluding a primary residence
$200,000 per year of personal annual income
$300,000 per year of household annual income
Ordinary (non-accredited) investors are largely
excluded

9. The JOBS Act
• Title II: General Solicitation
• Title III: Crowdfunding
• Title IV: Regulation A+ (Mini IPO)

10. SEC Rulemaking
 General Solicitation Rules
Effective September 23, 2013
$35 billion in transactions completed in the first
seven months
 Crowdfunding Rules (Title III)
As of today, final rules have not been issued
Draft rules released in the fall of 2013
Rules viewed as challenging for small businesses
and startups

11. State Laws
 Many states are acting
 Texas among them
 Rules are less
restrictive than JOBS
Act Title III
 States pressure
congress and SEC
 Catch

12. Reg D 506C Filings
• September 2013 through March 2014
• Filed: $98 Billion
• Funded: $35 Billion
Source: Offerboard

13. Lots of Platforms
Source:

14. Angel Investors

15. How Angels Invest
 Angels typically invest in groups
 Some groups create pools or funds of money
 Some groups allow members to invest directly

16. What Angels Invest In
 Angel groups often specialize
 Most invest exclusively in early-stage
startups, often before sales begin
 Invest in the sorts of things that made them
rich
 Popular investments: internet, hi-tech, clean-tech,
scalable
 Things that typically don’t work: retail

17. All Angels Are Rich
Accredited
Angel
Investors
Investors

18. Estimating the Cost of
Investment Crowdfunding

19. Cost of Audits/Reviews
 The cost of audits varies enormously
 A brand new startup with virtually no history and
no revenue could cost less than $10,000 to audit
 Fortune 500 companies spend millions on audits
 Geography matters: An audit in New York City costs
more than one in Houston
 A review includes an opinion of the auditors much
like an audit and still requires work and risk
 Expect to pay 50 percent as much for a review as for
an audit

20. Cost of Legal Work
 Cost of legal work varies widely
 Big, “expensive” firms don’t necessarily cost more—
they’ve done this before
 Some will fix fees, but most work by the hour
 “Ball park” estimate of your fees:
 $5,000 + 2 % of money you hope to raise
 Note that investors may require you to pay their
fees, too

21. Platform Fees
 Investor Carry Model
Up to 20 percent of the investment gain
 Percentage of Raise
Expect to pay 5 to 10 percent
 Listing Fees
Expect to pay $100 per month or more if you pay no other
fees
 Some portals may charge a combination of fees

22. Other Fees
 Investor accreditation fees
 Escrow fees
 Document signing fees
 Due diligence fees
 Travel costs
 Printing costs
 Like staying at a five-star resort—you’ll get
charged for everything

23. When Fees Are Paid
 Accountants typically collect after but may
require a deposit
 Lawyers typically collect monthly
 Platform’s carry is collected when sold
 Platform’s success fee is paid at closing out of
proceeds
 Platform’s listing fees are paid monthly
 Other fees generally paid as incurred

24. Hybrid Approach

25. Friends and Family
 If you are approaching only Accredited
investors, make no exceptions among
family and friends
 Reach through your family and friends
to their Accredited investor network
 Pitch individually over coffee or lunch
 Direct prospects to your online offering
on the platform

26. Angel Investors
 To raise a round over $100,000 you’ll likely need to
recruit angel investors
 Work your network for introductions
 Apply on angel network websites
 Pitch angel networks according to their rules
 Invite them to lead the round on your online
offering
This really means that they get to price the round
 Other investors will be more likely to follow

27. Start Before You Start
 No one wants to be the first to invest
 Get at least 10 percent of your goal
committed from family and friends
If you can’t get 10 percent, you certainly
can’t raise 100 percent
Don’t jump the gun—get your 10 percent

28. Build Your Audience
 Reach out to customers
 Use your real world networks to build
your online networks
 Leverage your investors as each one
commits

29. Email is the King of Online
Communication
 Before you start using social media, be sure you
reach out to your network by email
 Carefully, thoughtfully personalized email gets
answered
 Using your email newsletter isn’t nearly as effective
as personal, one-on-one communications
 Use email to schedule even more personal
communications like phone calls, video chats and
face-to-face meetings

30. Build Social Media
 LinkedIn, Twitter, Facebook and Google+ are
required
 LinkedIn is great for reaching your network of
professionals
 Twitter is the best for shared interests
 Facebook is pay-to-play model for business
 Google+ is helpful for search results
 Be active where you are

31. Tell the Story Everywhere
 Connect with your LinkedIn network
 Post regularly on your personal Facebook
page as well as your company page
 Tweet at least daily about the business and
regularly about the campaign
 Post at Google+, too
 Use a tool like HootSuite or BufferApp

32. Prepare a Cool Video
 You will give investors a lot to read
 Give them a video that tells the whole story
 Summarize the business plan
 Create a clear sense that you will solve a problem
 Note that without investment you can’t solve it
 Promise that with the money you will solve it
 Be cautious about making projections
 Review your script with counsel before shooting

33. Leverage Your Platform
 Platforms will vary in their tools and their
investor audiences
 Use whatever tools they offer
 Build a relationship with the platform The
platform will likely reciprocate
They’ll give you training, support and insights
They may introduce you to their proprietary
network

34. Small Group Meetings
 Pitch new investors everyday at lunch
 Have a presentation ready on your iPad
 Help people understand the problem
you solve and your solution
 Guide them through your projections
 Explain the offering process
 Explain the offering and valuation
 Qualify and close

35. Large Group Meetings
 Hold one or two large group meetings
 Do it after you have commitments for 1/3
 Invite all interested investors to participate
 Include remote participants via Google Hangouts
 Use the same script you use at lunch
 Use paper forms to qualify and commit everyone
 Use online forms to qualify and commit online

36. Follow Up
 As a general rule, even the most excited investors
will need your help
 Follow up with every candidate investor personally
 Answer questions
 Ask, “What additional information do you need
before you are ready to commit?”
 Follow up with the requested information and ask
again until they commit

37. Collecting the Money
 An online escrow account is likely to be used
 Money collects there until a threshold
defined in the agreements is collected
 Money is then dispersed according to the
agreements
Most money goes to you
Any platform related or other fees charged to you
will be deducted

38. Before we Conclude/Q&A
Visit devinthorpe.com/kickercon to download
these slides and get a free download of my book
Your Mark on the World.