Title III Crowdfunding For Real, Part I

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Forbes | Mary Juetten | Dec 20, 2016

title-iii-crowdfunding

After attending the fifth annual Global Crowdfunding Convention in Las Vegas (which I wrote about here), I was approached by a reader who proposed I interview companies that had raised capital through Title III of the JOBS Act. A newer provision that went into effect in May of 2016, Title III allows for non-accredited investors to purchase equity in companies, which means that the average American can now buy shares in private companies.

Grant Harvey, co-founder of Gravity Pull Media, lined up eight companies for me to interview. In this first installment of a three-part series, I talk with Michael Moormeier of MobileSpike, Josh Hare of Hops & Grain, and Jeff Annison and Paul Scanlan of Legion M.

Mary: Tell me about your company.

Moormeier: MobileSpike, Inc. (MS) is a company that saves lives by employing our MobileSpike Vehicle Disablement System to stop high-speed police chases, with the simple push of a button. In America, someone dies every single day from high-speed chases, and the tools police use to stop them is more than 40 years old. MobileSpike is a proven, patented, disruptive technology that’s taking aim at a market worth more than $30M and in desperate need of a modern solution.

Hare: At Hops & Grain Brewing (HG), we make beer to enhance the human experience through engagement with our brand, our team, and our community. We foster a culture of transparent and open dialogue with our customers and our employees to grow the most sustainable business possible.

Annison & Scanlan: Legion M Entertainment, Inc. (LM) is the world's first fan-owned entertainment company. We work with established Hollywood creators to develop movies, TV, and VR projects owned by fans. By uniting a community of fans who are emotionally and financially invested in our projects, we make these projects more likely to succeed and create a sustainable competitive advantage. Our goal is $M investors (in fact, our logo is the Roman numeral for 1M), which would result in a capitalization of about $500MM.

Mary: Did you raise capital outside of crowdfunding?

MS: In 2008, while in development of our original Gen1 system, MobileSpike raised $1.2M through a Reg. D raise spread over 18 months.

HG: We opened our brewery in October of 2011 with private investments from friends and family. Since then, we've financed our most recent expansions, which started in the fall of 2013, through debt financing with Able Lending based in Austin, TX.

LM: We launched the company in March and raised just over $400K from friends and family to get things off the ground.

Mary: Tell me about your Title III raise.

MS: At the time of our first Title III raise, no one had ever done a Title III. With that in mind, we set our sights on simply hitting the minimum, which was $50,000. Of course, one always hopes for more, and our documents reflected such hope. In the end, we raised $112,000 in a short and very exciting 60 days.

HG: Our target raise for our Title III crowdfunding was $250,000, and in 8 weeks, we raised the maximum allowed by law, $1M. Our Title III raise ended in mid-August.

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LM: We were one of the very first companies to launch a Title III on May 16, and we were one of the very first to close a $1M round. Our Title III was only open for three months, but was heavily oversubscribed, with approx. $1.4M worth of commitments for a round that was legally capped at $1M. We could satisfy some of the extra demand by moving approximately $300K from accredited investors to a parallel Reg. D round, but ultimately, we had to return about $100K of people’s money, which was disappointing on both sides.

Mary: What was your biggest challenge with Title III?

MS: The biggest challenge we faced was not having one single person to consult with on best practices . We have always believed that “the best way to succeed is to find someone who has already done it, and do exactly what they did.”

HG: The biggest challenge that we saw with Title III was explaining the platform to interested investors given that it was so new . Our raise was incredibly successful, but what I've seen observing other companies using the same platform is that without a strong and engaged base of social media followers, it seems to be difficult for many companies to communicate the potential for their brand, especially with startup brands.

LM: Our biggest challenge with Title III was raising awareness for our company and explaining the JOBS Act. We’re a brand-new company, using brand new laws to raise money in a brand-new way. We were starting with people who had never heard of us or the JOBS Act, and ultimately, we needed to convince them to enter their bank account information on a site they had never heard of before. It wasn’t easy to overcome this, but over time, we figured things out. One of the keys was creating a members-only private Facebook group that allowed potential investors to come inside, mingle with existing investors, and see what we were all about. The energy and enthusiasm in this group is contagious, and it has been instrumental to our success. We’re building more than a company—we’re building a community and a movement. As the JOBS Act becomes more mainstream, we can spend less time explaining the history and more time showcasing our company.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

 

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