Category Archives: Equity Crowdfunding, Alternative Funding

September 27, 2017   Equity Crowdfunding, Alternative Funding, Legal Issues, Regulation, Consultation, Venture Funding and Building   No comments

How to Effectively Market an Equity Crowdfunding/Reg A+ Offering

HuffingtonPost | By Eric Fischgrund | Sept 25, 2017

Equity crowdfunding appears to represent a simple solution for businesses – both startup and firmly established – that are looking to raise money to fund their vision. By allowing investors (and fans of the brand) to invest in their company online, companies view this funding mechanism as a way to bypass banks, brokers, and toxic financers. You file significantly reduced SEC-paperwork, throw a website up, and wait for your offering to go viral. Once the internet does its thing and your hyperlink is shared by e-mail as well as endless Facebook and Twitter accounts, the raise will be complete and you can begin planning the listing of your IPO.

If this seems too easy and too good to be true, you’re right – it is.

Unfortunately, too many companies and individuals are being talked into this strategy without the appropriate background information, and as such, the results of poorly executed crowdfunding campaigns are much easier to find that the success stories.

But there are success stories that were made possible only because of those who adequately planned for them. Over the past year, I have spoken with at least 30 companies considering some form of equity crowdfunding (Regulation A+, Reg CF, 506c, testing the waters, etc.). One thing I am continuously surprised by is those who are unprepared to commence an online raise.

See: What Works In Equity Crowdfunding; Insights From Research

As such, here are some general tips for marketing an equity crowdfunding campaign:

1. No two campaigns are alike. Like any marketing or communications initiative, no two companies are the same, and thus, no two crowdfunding campaigns should be executed the same way. The biggest mistake I see is thinking that a one-size-fits-all marketing approach that “worked really well in the past for another company and their raise” – will be successful. It won’t.

“Successful equity crowdfunding does require a great marketing plan executed by a creative marketing team,” said Kendall Almerico, CEO of Bankroll Ventures and one of the country’s leading experts on equity crowdfunding. “Coca-Cola, Cadillac and Calvin Klein do not market their brands the same way. Equity crowdfunding companies must engage a team that understands and markets the company in a unique way that stands out from all the noise.”

Take this into consideration before planning, as each company and campaign requires its own messaging, its own advertising strategy, and its own look and feel. Figure out what your strengths are, and market to them. For example, if your story has great visuals, find a way to leverage it via some form of multimedia, preferably video. Perhaps you are an emerging company working in a high-growth industry with plenty of competition. Focus on how to differentiate yourself from the competition, while outlining the existing market opportunity and what it means for you and your investors.

2. Get your online presence in order. Raising money from a diverse audience and group of sources can be difficult, but nothing makes equity crowdfunding so challenging as to do so with a poorly designed or ill-functioning website. The investment website is the primary way you are soliciting funds, and as such needs to clearly lead potential investors through the offering process. Think about it – using the analogy of an open house – why leave your trash on the front lawn, not fix the fence, and neglect a new paint job? Getting your digital presence ready means focusing on messaging for the website, carefully reviewing the design and aesthetics, proofing all content, and last but not least – making sure the user experience is a positive one! Do not underestimate the importance of the landing page for your online offering.

Further, legal context with regards to selling securities online must be considered. “General solicitation under the JOBs Act can open up many doors for a company seeking investments, but please, run your proposed content by your securities lawyer,” said Andrea Cataneo, a securities attorney with Sheppard Mullin Richter & Hampton LLP.

“Solicitation can mean advertising, webinars, internet offerings, group presentations, but it does not mean hype or exaggeration.”

See: Equity Crowdfunding Is 1 Year Old Today, Wefunder Is Top Platform

3. Identify and market to your audience. Understanding your ideal investor profile isn’t easy, but it needs to be done to build and leverage a captive audience. If you are a company reading this and looking to raise money online, and already possess an existing database of thousands or even hundreds of thousands of contacts (be it customers, clients, partners, etc.) with e-mail addresses, congratulations! You are ahead of the curve. Or, perhaps you already have a good feel for the sort of individual who is likely to invest in your company, and now you just need to go about marketing directly to them. Review site demographics, consider the profile of past investors and interested parties, and try to make that determination early, but…

4.…If you don’t have an existing audience, build one. Far too often a company approaches us with a great idea, a well-designed website and video that clearly spells out the investment opportunity, and a strong message for the media. This should result in success, right? Well, not always. Equity crowdfunding requires some form of direct marketing, and to do so, a company must have a base, either a significant social media following or a database consisting of contact information. If you don’t, social media advertising has proven to be a lead driver of web traffic and conversions. Consider running a Facebook advertising or Google AdWords campaign that drives specifically targeted people to your investment landing page. As many know, online advertising can be precisely targeted and is a great way to get an idea and offering in front of potential investors.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both investment and social crowdfunding, blockchain ICO, alternative finance, fintech, P2P and online investing stakeholders across the country.  NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a vibrant and innovative online financing industry in Canada.  Learn more About Us or visit ncfacanada.org.

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September 21, 2017   Equity Crowdfunding, Alternative Funding, Fundraising, Investing, Trading, Legal Issues, Regulation, Consultation   No comments

Changes to start-up crowdfunding exemption will increase access to capital for B.C. issuers

BCSC  | Sep 21, 2017

Vancouver – The British Columbia Securities Commission (BCSC) today announced improvements to crowdfunding rules that will enable B.C.-based issuers to access investors in Alberta when conducting crowdfunding campaigns. The amendments also permit an increased investment, for some investors, of up to $5,000.

“With these amendments, B.C. is harmonizing the crowdfunding regime and providing start-up and early stage issuers with access to more potential investors and more investment dollars,” said Peter Brady, Executive Director of the BCSC. “The BCSC consults extensively with B.C. technology industry businesses and stakeholders, and we’re proud that those consultations are yielding real results.”

The BCSC’s Tech Team recommended the amendments to B.C. Instrument 45-535 Start-up Crowdfunding Registration and Prospectus Exemptions (BCI 45-535) following stakeholder consultations and after reviewing the results of the BCSC’s 2017 Tech Survey. The BCSC launched the survey in January 2017 to engage with technology industry stakeholders and businesses and learn what challenges and opportunities the sector currently faces.

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Survey respondents who were involved in crowdfunding identified harmonization across jurisdictions as one of their biggest concerns. The new amendments take steps to resolve that issue by allowing an interface between the B.C. and Alberta crowdfunding rules. Respondents also recommended increasing the investment amounts allowed under the current crowdfunding rules. The new amendments raise the investment limit from $1,500 to $5,000, if the investor has obtained advice from a registered dealer that the investment is suitable for them.

“Consultation with industry is very important to us, and we want to thank everyone who took the time to provide their input through the survey,” said Brady. “We value the insights of fintech businesses and stakeholders, and we believe that these crowdfunding amendments show our dedication to working with industry.”

We anticipate issuing a publication later this year that will summarize the results of the survey and our other fintech stakeholder consultations.

Information on BCI 45-535, including guidance tailored for funding portals, issuers and investors, can be found on the BCSC’s Start-up Crowdfunding webpage. The BCSC's Tech Team can be reached by email at TechTeam@bcsc.bc.ca.

About the British Columbia Securities Commission (www.bcsc.bc.ca)

The British Columbia Securities Commission is the independent provincial government agency responsible for regulating capital markets in British Columbia through the administration of the Securities Act. Our mission is to protect and promote the public interest by fostering:

• A securities market that is fair and warrants public confidence
• A dynamic and competitive securities industry that provides investment opportunities and access to capital

- 30 -

Media Contact:
Alison Walker
604-899-6713

Public inquiries:
604-899-6854 or 1-800-373-6393 (toll free)
inquiries@bcsc.bc.ca

Learn how to protect yourself and become a more informed investor at www.investright.org

View original release:  here

See:  45-535 [BCI - Variation Order]

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both investment and social crowdfunding, blockchain ICO, alternative finance, fintech, P2P and online investing stakeholders across the country.  NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a vibrant and innovative online financing industry in Canada.  Learn more About Us or visit ncfacanada.org.

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September 21, 2017   Equity Crowdfunding, Alternative Funding, Fintech International, Legal Issues, Regulation, Consultation   No comments

Australia to Fix Gap in Crowdfunding Regulations as Private Companies May Gain Eligibility in New Legislation

Crowdfund Insider | | Sep 14, 2017

This week the Australian Parliament introduced new legislation that will extend crowdfunding or “crowdsourced equity funding” (as the Aussies call it) to private companies. This is an important fix that will create a far more robust and equitable crowdfunding ecosystem in Australia.

Earlier this year, Australia finally got around to crafting more workable rules with an unfortunate gap in the law. The final bill included a glaring omission: smaller, private companies – representing the vast majority of all businesses in Australia were not allowed to crowdfund. Instead, the legislation only applied to unlisted public companies thus disallowing the majority of SMEs and startups to leverage the new rules. Of course, a bit of an uproar ensued. In fact Ed Husic, an MP from the opposition Labor Party, slammed both the bill and industry representatives at that time – including FinTech Australia. Representatives from FinTech Australia quickly fired back saying they “strongly support the legislation being extended to private companies.”

In May of this year, draft legislation cropped up with language to allow private companies to equally enjoy the new form of access to capital, encouraging the young industry.

The addition of private companies means that startups will be included and other more established private companies will not be compelled to convert to unlisted public companies. This is a huge turn of events.

Scott Morrison, MP – Treasurer, introduced the bill in Parliament stating;

“This bill sets out amendments to the Corporations Act 2001 to enable to proprietary companies in Australia to access crowdsourced equity funding. This will be a game changer, once again, for Australian start-ups and new small businesses. This is yet another example of the Turnbull government getting on with the job and taking action now by backing-in businesses, getting the settings right to create jobs and help our economy transition. The extension of Australia’s crowdsourced equity funding framework to proprietary companies delivers on the announcement made in the 2017-18 budget and demonstrates the government’s commitment to fostering a more innovative and creative Australian economy, by ensuring that start-ups and early-stage businesses can access the funding they need. Facilitating access to crowdsourced equity is part of the government’s agenda to develop a strong and vibrant fin-tech industry in Australia.”

FinTech Australia, an important voice in the debate, echoed Stewarts sentiment regarding the draft legislation.

“We’re pleased to see the recent rapid progress in the development of this draft legislation, and in particular the commitment both sides of Government are making to usher in this new source of funding as efficiently and safely as possible,” said FinTech Australia CEO Danielle Szetho.

Szetho added this will help drive growth and innovation for both Fintech crowdfunding intermediaries, and small to medium businesses across Australia through a cost-effective form raising growth capital.

“We’re finally bringing Australia up to speed with other leading international jurisdictions such as the UK, United States and New Zealand who have equity crowdfunding in place.”

Szetho added that other improvements in the pending legislation will boost the sector. Companies may now be able to raise up to $5 million from retail investors – who are individually capped at $10,000 per year. The Aussie Government has made legislative changes to lift the threshold at which both public, and eventually private crowdfunding companies are required to undertake a full independent audit, to $3 million in capital being raised. The original threshold had been set at $1 million.

“The requirement for a full audit to be undertaken for fundraising above $3 million is a more balanced approach which makes audit costs comparatively less expensive to the amount of money raised, while reflecting the need for greater disclosure at this funding level,” commented Szetho. “We should also point out that any companies undertaking crowdfunding will need to provide offer documents, to ensure detailed disclosure and transparency for consumers. These offer documents will be required to be signed by two company directors and lay out key financial and other information about the company. They will also need to comply with Australian Securities and Investment Commission (ASIC) requirements.”

Szetho said FinTech Australia also supported the removal of a provision which would have placed significant red tape around the disposal of shares obtained through crowdfunding, possibly diminishing the appeal of crowdfunding to both companies and investors.

In brief, the provision would have meant that shares purchased in a crowdfunding round were on-sold to a new shareholder, the new shareholder would have counted towards the 50 shareholder limit imposed upon private companies. Such sales therefore had the potential to tip companies inadvertently over the shareholder limit, and force them to become public companies. A regulatory trap. Szetho said the legislation was complex as it overlapped with existing regulations. But by initiating constructive conversations with policymakers they were pleased that shares may be sold in off market transactions without impacting shareholder limits.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both investment and social crowdfunding, blockchain ICO, alternative finance, fintech, P2P and online investing stakeholders across the country.  NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a vibrant and innovative online financing industry in Canada.  Learn more About Us or visit ncfacanada.org.

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September 17, 2017   Equity Crowdfunding, Alternative Funding, Fintech International, Fintech Opinions   No comments

Equity crowdfunding a slow burn, advisers say

The Australian Financial Review | By Michael Bailey | Sept 17, 2017

The legalization of equity crowdfunding has met with enthusiasm from those hoping to raise money with it, but financial planners say it will be years before it is taken seriously by investors.

Leading advisers contacted by The Australian Financial Review said no clients had approached them in relation to the new crowdsourced equity funding legislation, which was introduced by Treasurer Scott Morrison on Thursday.

With Industry Minister Arthur Sinodinos set to open The Australian Financial Review Innovation Summit in Sydney on Tuesday, the government is hoping equity crowdfunding will help bring start-ups and innovation closer to the average Australian, and boost support for the "ideas boom" agenda blamed for nearly losing it the 2016 election.

See: Australia: Minister Kelly O'dwyer Details Equity Crowdfunding Laws

Once the legislation passes the Senate with opposition support as expected, all proprietary and unlisted public companies with an annual turnover or gross assets of up to $25 million will be able to advertise their business plans on licensed crowdfunding portals and raise up to $5 million a year to carry them out.

Investors can put as little as $50 and up to $10,000 a year each into an unlimited number of ideas.

However, a principal at Bravium Financial Planning, Scott Farmer, did not expect a rush.

"Equity crowdfunding is a new asset class, and diversification is usually a good thing for investors, but we saw things like exchange-traded funds and separately managed accounts take years to catch on in Australia versus the US or UK, and I think this will be no different," Mr. Farmer said.

See: Australian SMEs Are Turning To Alternative Sources Of Funding

"But there will be two sub-sectors of people in it from day one: the ones who love the companies being crowdfunded and want to be part of their innovation story, and the investors for whom excitement ranks ahead of actually making money."

There was no way most financial planners would have time to research single equity crowdfunding deals on behalf of clients, said Will Hamilton of Hamilton Wealth.

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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, alternative finance, fintech, P2P and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, and networking opportunities to over 1600+ 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 ncfacanada.org.

 

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September 1, 2017   Entrepreneurs, Start-ups, Small Businesses, Equity Crowdfunding, Alternative Funding, FinTech and Alternative Finance, P2P, Lending, Digital Bonds, BNPL, Private Credit   No comments

Australian SMEs are turning to alternative sources of funding

Finder.com.au | By Elizabeth Barry | August 30, 2017

New research shows Aussie businesses are embracing online lending and P2P, but many are still not getting the loan they want.

Australian businesses are turning to crowdfunding, peer-to-peer (P2P) lending and online loans for finance, according to new research from Businessloans.com.au. The Small Business Credit Survey, conducted by ACA Research, found that the most sought-after alternative funding source was equity finance (34%), followed closely by online lenders (30%) and P2P business loans (21%).

CEO of GetCapital Jamie Osborn says that the alternative lending sector is at an important inflection point in Australia.

"The sector has moved through the early adopter phase and is now beginning to gain more mainstream attention," says CEO of GetCapital Jamie Osborn.

"At the same time, the leading lenders across the alternative lending space are continuing to innovate and offer businesses better products and customer experiences – as long as that continues, you will see the market further embrace the alternative lenders."

See: 

Alternative funding sources by application

  • 30% Online Lender
  • 34% Equity Finance
  • 18% Crowdfunding
  • 21% Peer-to-Peer
  • 12% Friends & Family
  • 2% Other

However, while small- to medium-sized enterprises (SMEs) are embracing alternative sources of capital, not all of them are receiving the loans they hope for. The survey revealed that while 84.1% of businesses were successful in their applications, less than half of those (38.9%) of those were approved for all of the credit they applied for.

It is interesting to note that the number of businesses which were declined a loan is only 1.6% of respondents. The remaining 14.3% of the "unsuccessful applicant" group was approved for less than half of the loan they had asked for. Over one-third of this group (35%) had applied for more than or equal to $250,000.

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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 1600+ 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 ncfacanada.org.

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August 21, 2017   Blockchain, Crypto, Digital Assets, Tokens, CBDCs, Stablecoins, Metaverse, NFTs, Equity Crowdfunding, Alternative Funding, FinTech and Alternative Finance   No comments

Blockchain in Real Estate: You Can Now Buy Fraction of House

The Cointelegraph | By Darryn Pollock | August 14, 2017

The power of the Ethereum Blockchain continues to permeate traditional models of business and investment with Real Estate the latest target. Through crowdfunding and smart contracts, REALbelieves that the inefficacy and illiquidity of this traditional institution of investment potential can be opened up.

The idea of investing in real estate used to involve forking out huge sums of money to buy property, in a person's locality, with the hopes that it earns a profit over running costs. However, crowdfunding, and even more recently, Blockchain technology, is disrupting this model.

Buy a fraction of a house

There is a lot of promise that comes with investing in property. Rent, as well as the appreciation of property, are consistent and reliable streams of revenue and return, however, breaking into the property market is not a game for all.

Recent ideas, such as crowdfunding have simplified many aspects of traditional investments and business, but they still have their problems. Crowdfunding involves the coming together of multiple parties, in an agreement of trust, to effect an outcome that usually has to be regulated by a third-party.

In the case of real estate crowdfunding, middlemen have to be employed to sustain an agreement between multiple parties so that the proper dividends are received and the benefits are equally and fairly distributed. Cross-border investments also come with their own issues.

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Breaking down the walls, with Ether

REAL’s belief is that their use of Blockchain, Ethereum smart contracts, and digital currencies, or their own tokens, can alleviate these problems.  REAL tokens will be used to invest in properties on their crowdfunding platform.

While some of the traditional real estate investment issues are being solved through crowdfunding, a new world of cross-border and trustless investment can be opened with Blockchain technology.

Through REAL’s platform, tangible real estate can be invested in fractionally and with digital currencies. By using the Ethereum network, smart contracts do the work.

In an Ethereum environment, the need for regulatory bodies and middlemen would seem to fall away, and with them the fees and problems surrounding potential global investment. By investing on an Ethereum Blockchain REAL propose that rental dividends, agreements between investors, and other intricate aspects of property investment - on a crowdfunded level - will be executed fairly and transparently.

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NCFA Jan 2018 resizeThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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August 15, 2017   Equity Crowdfunding, Alternative Funding, Fundraising, Investing, Trading, Legal Issues, Regulation, Consultation, P2P, Lending, Digital Bonds, BNPL, Private Credit   No comments

What Works In Equity Crowdfunding — Insights From Research

Forbes | My Say | August 14, 2017

As we have recently celebrated the fourth anniversary of the signing of the JOBS Act into law, it is a good time to take stock of the effect that the legislature had on equity crowdfunding in the United States. It is important to note, that equity crowdfunding is distinct from the rewards-based crowdfunding, exemplified by Kickstarter, in which project backers are typically motivated by the rewards (discounts), but receive no equity in the ventures. While the rewards-based crowdfunding has always been legal, public solicitation of equity investments (equity-based crowdfunding) was prohibited by the Securities and Exchange Acts of 1933 and 1934.

The JOBS Act contains several provisions that made it easier for the entrepreneurs to raise funding. Title II of the JOBS Act took effect in September 2013 and it allows entrepreneurs to raise funding via online equity crowdfunding platforms from accredited investors. Title III of the JOBS Act took effect in May 2016 and it expanded equity crowdfunding to include non-accredited investors. I recently completed several research projects focusing on leading Title II equity crowdfunding platforms and I will share a few emergent insights here.

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Since the passage of the JOBS Act, over $1.27 billion had been committed to more than 6,000 entrepreneurial ventures under Title II. Our analysis revealed that real estate investments have done particularly well under Title II. Patch of Land reports having facilitated more than 500 investments totalling over $300 million. In retrospect, it does not seem surprising that real estate investments do well under Title II because real estate loans represent a large commercial opportunity and they also afford investor protection by securing the loans with the underlying real estate assets.

Outside of real estate, Crowdfunder, a Title II platform, has also shown good traction in facilitating fundraising by early stage ventures. We examined 337 projects that attracted over $183 million in funding commitments between September 2013 and December 2016. Our analysis suggests that investors on the Crowdfunder platform are largely relying on a single signal to guide their investment decisions, namely whether a particular venture had secured funding from an established professional venture capital firm prior to running an equity crowdfunding campaign. For example, Revl, a smart action camera, had gone through Y Combinator and received funding from Comcast Ventures prior to launching a campaign on Crowdfunder, which exceeded the funding goal by more than 3X and raised over $9 million. The results imply that investors on Crowdfunder are willing to invest if a startup has been vetted by an established VC firm.

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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 1600+ 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 ncfacanada.org.

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