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by: William Michael Cunningham, Minorityfinance.com
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Creative Investment
Research, Inc. Crowdfunding and B2B Firms
It’s time…
Confidential. Not for reproduction or distribution.
Copyright, Creative Investment Research, Inc. 2013
2
The JOBS Act
Multiple Small Business Capital Access Channels
Allows existing and newly created companies (emerging growth
companies - EGCs) and small firms to raise up to $1 million
($1,000,000) in equity by selling shares.
Allows medium and larger firms issue up to $50 million of
securities per year “in offerings that are free from the resale
and investor restrictions associated with privately placed
securities.”
Women and Minority-owned firms: Title VII requires the SEC to reach out to women and minority
firms.
Confidential. Not for reproduction or distribution.
Copyright, Creative Investment Research, Inc. 2013
3
Disruptive Impact
Confidential. Not for reproduction or distribution.
Copyright, Creative Investment Research, Inc. 2013
0
10
20
30
40
50
60
70
80
90
1 2 3 4 5 6
Inv
estm
en
t V
olu
me
Time
Financing for the most difficult to finance small businesses.
Crowdfunding to financing businesses that could qualify for a business loan
Crowdfunding Disruptive Impact
4
Issues in the details
Emerging Growth Companies (EGCs):
Firms with less than $1 billion in revenues
25 to 26 million firms
What does this get you? The opportunity to raise up to $1 million online
Exemption from filing certain financial, executive
compensation and other data
Is that it? Yes. That’s all for you. Take what you can get and run with it.
Platforms and brokers, however, get a great deal.
Confidential. Not for reproduction or distribution.
Copyright, Creative Investment Research, Inc. 2013
5
Reporting and other requirements
Can safely ignore most of the more complicated
reporting requirements:
1. Price of security easy to determine:
THE MARKET WILL DO SO
2. Will have one owner and no history
3. Most owners won’t be looking to sell
Most of the Crowdfunding Provisions are like this
Most of the burden is on the Funding Platforms, at this
point, anyway…..
Confidential. Not for reproduction or distribution.
Copyright, Creative Investment Research, Inc. 2013
6
What most firms will report:
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Copyright, Creative Investment Research, Inc. 2013
The name, legal status, physical address,
and website address
The target offering amount, deadline
and regular updates regarding progress
Simple description of the purpose and
use of the proceeds.
Simple description of the business and
anticipated business plan
One or two names of the current
owners Simple offering price Share offering price
Simplified description of financial
condition, including, Simple (one or two person) ownership
and capital structure.
No risks relating to these factors
Simple income tax return and financial
statements..certified by the principal
executive officer Simple offering terms
None Simple or no exercise rights
Names of one or two persons who own
the firm
None
Crowdfunding Platforms
Since Emerging Growth Companies (EGC) are
raising capital over the internet, they must be
free to communicate (free from Securities laws)
Funding platforms are websites created for the
sale of EGC securities. They must:
– Register with the SEC and FINRA
– Provide risk and investor education materials
– Ensure that investors understand risk
– Manage crowdfunding process
7
Confidential. Not for reproduction or distribution.
Copyright, Creative Investment Research, Inc. 2012
8
Investor Limits/Rules
Confidential. Not for reproduction or distribution.
Copyright, Creative Investment Research, Inc. 2013
Less than
$100,000 in
investor net
worth
Can invest: the
greater of $2,000
or 5% of net
income
More $100,000
in investor net
worth
10% of net income,
up to a maximum
aggregate amount of
$100,000
9
Pebble Watch Screen Shot
Confidential. Not for reproduction or distribution.
Copyright, Creative Investment Research, Inc. 2013
10
Funded Projects on Kickstarter
Confidential. Not for reproduction or distribution.
Copyright, Creative Investment Research, Inc. 2013
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Less than $1k $1 to $10k $10k to 20k $20k to $99k $100k to $999k Over $1 mil
Funded Projects
on Kickstarter by funding
amount
Less than $1k
$1 to $10k
$10k to 20k
$20k to $99k
$100k to $999k
Over $1 mil
11
B2B Firms How many B2B firms need capital? All of them. CONSIDER CREATING A PLATFORM TO
FINANCE CUSTOMERS!
What should you be doing now? Preparing.
How?
Prepare business plan(s)
Get income tax return, audited statements
Outline/simplify ownership structure (if needed)
Review every single crowdfunding website you can
Review application process
Prepare your draft pitch
Enhance/enlarge social media/network
Confidential. Not for reproduction or distribution.
Copyright, Creative Investment Research, Inc. 2013
12
The Pitch
Confidential. Not for reproduction or distribution.
Copyright, Creative Investment Research, Inc. 2013
Create a ten (not including the cover) page slide PowerPoint
presentation that describes your business. Use this to create and
supplement your Crowdfunding website solicitation.
1. Cover slide – information on your
effort: address, etc
6. Marketing – what is the market for
your product or service?
2. Summary – summarize what you
propose to do
7. Sales – how will you sell your
product or service?
3. Team – describe who you are
working with, if anyone
8. Competition – who will you
compete against?
4. Problem – what problem does your
business address?
9. Milestones – what are your
progress points?
5. Solution – describe your solution to
the problem.
10. Money – how much money do
you need? What will you do with it?
13
For further information
Confidential.
Copyright, Creative Investment Research, Inc. 2013
Creative Investment Research, Inc.
William Michael Cunningham
The JOBS Act: Crowdfunding for Small
Businesses and Startups -
http://www.amazon.com/The-JOBS-Act-
Crowdfunding-Businesses/dp/143024755X
866-867-3795
202-455-0430