D A N I E L G O R F I N E

D I R E C T O R O F F I N A N C I A L M A R K ET P O L I C Y A N D L E G A L C O U N S E L , M I L K E N I N S T I T U T E

D E C E M B E R 4 , 2 0 1 3

HBSAB Panel: Crowdfunding Part II

State of Angel Capital

30

15.7

18.1

22.5 23.1

25.6 26

19.2 17.6

20.1

22.5 22.9

0

10000

20000

30000

40000

50000

60000

70000

80000

0

5

10

15

20

25

30

35

Total Angel Investment 2001-2012

Sum of Total Angel Investment (in billions) Sum of Total Ventures Funded

Data Source: UNH Center for Venture Research

Bill

ion

s

State of Venture Capital

8.01 11.35

15.01

21.47

54.85

105.12

40.96

22.17 19.69

23.26 23.59 27.59

31.93 29.97

20.25 23.29

29.67 26.96

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

0

20

40

60

80

100

120

Total Venture Capital Investment 1995-2012

Sum of Total Venture Capital Investment Sum of Total Number of Deals

Data Source: NVCA/ PWC Moneytree Report

Bill

ion

s

Venture Capital Moving Away from Seed

Data Source: NVCA/ PWC Moneytree Report

0

2

4

6

8

10

12

14

16

18

Bill

ion

s

VC Investment 2000-2013Q3

Startup/Seed Avg=$3mil

Early Stage Avg=$5mil

Expansion Avg=$8mil

Later Stage Avg=$10mil

State of Small Business Lending

Source: Thomson Reuters/PayNet Small Business Lending Index

60

70

80

90

100

110

120

130

140

Jan

-05

Ap

r-0

5

Jul-

05

Oct

-05

Jan

-06

Ap

r-0

6

Jul-

06

Oct

-06

Jan

-07

Ap

r-0

7

Jul-

07

Oct

-07

Jan

-08

Ap

r-0

8

Jul-

08

Oct

-08

Jan

-09

Ap

r-0

9

Jul-

09

Oct

-09

Jan

-10

Ap

r-1

0

Jul-

10

Oct

-10

Jan

-11

Ap

r-1

1

Jul-

11

Oct

-11

Jan

-12

Ap

r-1

2

Jul-

12

Oct

-12

Jan

-13

Ap

r-1

3

Jul-

13

Volume of New Commercial Loans and Leases to Small Businesses Q1 2005-Q2 2013

Sources of Startup Financing Limited

Source: Corporate Executive Board, US Small Business Administration

25

0.3

1

4

7

7

10

60

11

0.7

3

9

10

19

11

62

0 10 20 30 40 50 60 70

None needed

Venture Capital

Government Loan

Home equity

Other personal/family assets

Bank Loan

Credit Card

Personal/Family Savings

Sources of Startup Financing (% of firms)

Employers SolePropreitor

US IPO Market: Small vs. Big Companies

US IPOs with Pre-IPO Annual Sales Less Than or Greater Than $50m/Year

Source: SEC Advisory Committee on Small and Emerging Companies, September 2012; Ritter, University of Florida

Public vs. Private Market

Source: Ivanov, SEC

Aggregate Capital Raise 2009-2012 by Offering Method

Bill

ion

s

2012: Public Market Totaled $1.2tn Private Market Totaled $1.7tn

New Capital Access Tools

© 2013 Milken Institute

© 2013 Milken Institute

Funding Landscape

Angel Investment: Range based on lowest and highest total annual Angel investment per deal from 2001-2012, UNH data VC

Investment: Range based on lowest and highest total annual VC investment per deal from 1995-2012, NVCA data

Investment Stage range based on lowest and highest total annual VC investment per stage per deal from

1995-2012, NVCA data

Startup/Seed: $3.2mil Early Stage: $5.0mil; Expansion: $8.4mil; Later Stage : $10.3mil

Data Source: ACA, NVCA © 2013 Milken Institute

Donation-Based Crowdfunding in 2012

Source: TechCrunch, massoultion

Crowd Investing: Title III JOBS Act

Source: Fundable, Earn MBA degree.

Crowd Investing Disclosures Vary by

Offering Amount

Crowd Investing Offering Amount (including offerings in preceding 12 mo.)

Disclosure Requirements

Up to $100,000 Most recent income tax returns; financial statements certified by issuer’s executive officer

$100,000 - $500,000 Financial statements reviewed by independent public accountant

$500,000+ Audited financial statements

Source: sec.gov

SEC Proposed Rules

Investment Advice/ Recommendations

Investor Education Requirement

Portal Compensation

Models

Title III

Ongoing Disclosures

Rule 506(c) Investing

Title II of the JOBS Act

Ban on General Solicitation Lifted

Accredited Investor Verification Required

Reasonable Belief Investor Accredited

Proposed Rules

Regulation A+

Data Source: WR Hambrecht + Co, Dealogic

11% 15%

9% 4%

12% 8% 6% 9% 3% 3% 1% 3%

10% 10% 6%

19%

12% 15%

8% 4%

0% 4%

8% 5%

25% 24% 29% 30%

27% 25% 28% 30%

18%

34%

19%

41%

54% 51%

56%

47% 49% 52%

58% 57%

79%

59%

73%

51%

IPOS in US % of Total Number of Deals

Small Company IPOs have declined as a share of overall market Total filing expenses under Regulation A+ are estimated to decrease by

50% when compared to smaller reporting company S-1 filings, and by 71% when compared to traditional S-1 filings

$100+mil

$50-100mil

$25-50mil

$0-50mil