Karsten Wenzlaff, Advisor
August 26th, 2025
Crowdfund Insider | | Sep 30, 2014
Seedrs recently chalked up another first by offering shares of Chapel Down in an equity crowdfunding campaign on their platform. Chapel Down is a publicly traded company listed on the ISDX growth market in the UK. The funding closes on October 1st but stands at over £4 million today.
The funding for Chapel Down is part of a larger funding round to raise capital for expansion of a successful business. The largest offer ever on the Seedrs platform, this may be the first publicly traded company leveraging the new form of capital raising but in Seedrs opinion it will not be the last.
While equity crowdfunding has been targeted as a boon for startups and small companies in need of early stage funding, a growing number of businesses are comprehending that offering shares, in a transparent manner, to consumers familiar with the brand or company can be very effective. Seedrs commented on Chapel Down and their view to the future stating;
“But now, later-stage companies are catching on to the power of professionally managed crowdfunding platforms (like Seedrs). What we are starting to realise is that equity crowdfunding works really well for certain types of business, regardless of what stage they are at.”
“…This is an excitingly innovative approach to raising growth capital, especially when most companies at their stage, with their positive financial traction, traditionally reach out to institutions and large individual investors in The City. This is part of the continuing evolution in crowdfunding.”
The Seedrs author continued with bulleted reasons why this makes sense:
TechCrunch | Kim-Mai Cutler | Sep 26, 2014
In the fast-emerging space of equity crowdfunding, Silicon Valley insiders are pretty familiar with players like AngelList. But there’s actually a startup crowdfunding site out of Israel with a veteran team that has a good deal of momentum as well.
OurCrowd, which is run by serial entrepreneur and venture capitalist Jon Medved, has put at least $70 million to work in roughly 50 companies and has plans to invest $100 million more over the next year. One of their companies, ReWalk Robotics, an exoskeleton company that helps disabled people walk again, just IPO-ed a little over week ago and now has a market cap of about $360 million.
This is an apples-to-oranges comparison for reasons I’ll explain in a second. But for comparison, what OurCrowd is raising and committing is more than the $40 million CircleUp has put to work and the roughly $20 million that Y Combinator-backed Funders Club has done.
Why are OurCrowd’s volumes larger?
Well, on the spectrum of having a wide-open market for companies and investors to connect with each other versus the traditional and more restricted venture route, OurCrowd leans toward the latter.
It’s an entirely different model.
While OurCrowd takes accredited investors on one side, they have a 50-person due diligence team on the other side that vets deals. Then they let investors pick and choose which qualified companies they want to invest in. OurCrowd puts in about 5 to 15 percent of the funding for every deal, unlike other platforms which might just take carry and not have skin in the game. Investors don’t have to commit to every single OurCrowd deal, but they can choose which ones make sense for them.
OurCrowd also has more requirements akin to established venture funds. They take board seats and have rights like pre-emptive or anti-dilution rights.
“We’re more like a VC,” said Medved, who previously started a venture fund called Israel Seed Partners and ran an early publicly-traded mobile company called Vringo in the ringtones and content space. “A lot of it has to do with my background as a venture capitalist. I don’t think you need to throw everything out.”
He went on, “What if you could essentially have the best of both worlds — somebody who is picking the deals, taking care of legal, and giving you the protection that the venture guys get — but you still have discretion? I don’t think the Valley understands the need for this. Not everyone is an angel and most rich people have never invested in a startup.”
But Medved isn’t overly critical of other platforms. He just stresses that his model is fundamentally different.
While the company is not as well-known in the Valley because it’s headquartered in Jerusalem, it has global ambitions. It doesn’t want to be some kind of in-road to the Israeli market, although Medved is deeply connected there. About half of OurCrowd’s investment money comes from the U.S., with the rest from overseas and less than 10 percent from Israel.
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Increase your organization’s profile and gain access to a dynamic group of industry front runners. Learn more About Us or contact us at casano@ncfacanada.org.
Entrepreneur | Kendall Almerico | Sep 22, 2014
When making an equity investment in a startup, there are many issues to consider.
The U.S. Securities and Exchange Commission is expected to release its final JOBS Act equity crowdfunding rules, and entrepreneurs will be allowed to sell equity in their companies through online crowdfunding portals to more than just accredited investors. The law promises to be a game changer for startups. As a result, investors will have easily accessible investment choices at their fingertips.
Here are 10 questions to raise about making an equity investment in a startup company. I pass these along from my personal experience as an investor, as well as my 25-year history as an attorney helping people start and fund businesses:
An investor needs to know what he or she is getting in exchange for the cash infusion. Will it be equity (shares of ownership of the company) or a convertible note? The note means that the investor loaned money to the company with the right to either be paid back or to turn the loan into equity as some later date.
When an investor buys an equity stake in a startup, usually those shares cannot be sold or traded for several years. If the investment is a convertible debt, figure out the conversion date. This is when the company either pays the money back or the investor can convert the money loaned into equity according to the terms of the convertible note.
I am amazed when I see business plans that don't describe a visible means of monetization. If a company has not yet started generating revenue (like most startups), look at how the enterprise plans to make money. If the company has indeed started generating revenue, examine how it's making money. Consider if the model makes sense and is sustainable. Is the model scalable?
Equity shareholders should find out if they will receive dividends or distributions, how much and when. What happens if the company is sold, merges or goes public? Convertible note holders need to know their interest payment schedules and ask what happens in the case of a sale, merger or IPO.
Investors need to find out if they gain voting rights at the company and of what kind. Can the ownership percentage be diluted? Can the investment be sold or transferred to a third party? If so, how and when?
Research the "use of proceeds" and understand what, why, and how the startup intends to spend the money raised. The use of proceeds offers a good look inside the mind of the business owner. Is the amount being raised enough to reach profitability or is it just enough to arrive a the next financing round? Is everything the company is paying for seem reasonable?
I often pay more attention to this aspect than just about anything else. I like to invest in companies with founders who know how to run a business and who have a track record of success. If the founder has no track record then he or she should surround herself with professionals with experience. A strong management team is no guarantee of success but is an important factor to consider.
The National Crowdfunding Association of Canada (NCFA Canada) is Canada’s Crowdfunding Hub. Newly formed, dynamic and inclusive, the NCFA Canada works closely with industry groups, government, academia, other business associations and affiliates to create a strong and vibrant crowdfunding industry and voice across Canada. Membership is comprised of a network of industry participants including crowdfunding portals, consultants, professional services providers including lawyers, accountants, due diligence companies, start-ups, SMEs and social enterprise groups raising seed and growth capital interested in crowdfunding markets in Canada and beyond. The National Crowdfunding Association of Canada is a networking and solutions-based organization that provides education, research, advocacy, support and leadership to Canadian crowdfunding communities. While membership has a Canadian focus, the NCFA Canada remains open and inclusive to International members. For more information please visit ncfacanada.org.
JDSupra Business Advisor |Richard Stobbe | Sep 24, 2014
A Canadian company, Vrvana, Inc. is seeking $350,000 through Kickstarter, to finance its development of a virtual reality headset marketed as the Totem. Vrvana has elected to pursue a reward-based crowdfunding model. For example, minimal donations of $15 come with a newsletter subscription and event invitations. The top end contribution of $8,000 will net a Totem VR headset and a dinner date with the team of engineers.
Crowdfunding attracts headlines and cash, but in Canada the rules and laws surrounding equity crowdfunding are still in development. The securities or equity-based model of crowdfunding refers to small investments in exchange for securities - which has a broad definition meant to capture shares in the start-up company, including pref shares or convertible securities, non-convertible debt securities, or units of a limited partnership. In plain terms, a company could use this method of crowdfunding to raise money by selling a piece of the company, rather than selling products or services.
In Canada, a number of provinces are considering some variation of crowdfunding rules, either for a “Crowdfunding Exemption” or a “Start-up Exemption” or both. Ontario, B.C., Manitoba, Quebec, New Brunswick and Nova Scotia are considering the exemptions. Alberta is considering the public comments, but has not formally published any proposed rules.
Here are the highlights of the proposed Start-up Exemption for crowdfunding in a number of Canadian provinces.
The proposed Crowdfunding Exemption is a variation, with a few notable differences: it would have higher thresholds and would be open to both reporting issuers and non-reporting issuers:
Remember this is currently proposed, but not yet “legal”. The comment period closed in June, 2014, and Canadian securities regulators are considering comments. Rule changes will not likely come into effect until 2015. However, Saskatchewan has already launched its Equity Crowdfunding Exemption which is similar to the Start-up Exemption summarized above.
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Increase your organization’s profile and gain access to a dynamic group of industry front runners. Learn more About Us or contact us at casano@ncfacanada.org.
Joi Media Blog | By Brock Murray | Sep 18, 2014
The Real Estate crowdfunding industry (alternatively referred to as Property Crowdfunding) is moving quickly as awareness increases around the globe and favorable legislation is proposed and pushed forward. We put together a high level overview of recent activity including our thoughts, insights, and opinions and we encourage groups to reach out that would like to learn how we can assist them with their own initiatives.
Like any sector that heats up, there is an abundance of misinformation, hype, and a sense of urgency in many cases. While early movers like fundrise.com (raised a $31 million Series A, lead by Renren, right around the time we spoke initially) and realtymogul.com (raised a $9 million Series A, lead by Canaan Partners at the end of March) are disrupting the market and creating awareness for an efficient online offering/transaction model. They are ultimately what we call intermediary platforms, bringing investors and third party issuers together and there are many shortcomings in terms of the quality of the deals they have access to (it depends how many firms are willing to post deals and give a commission to the platform and then how many of those deals are good quality). That being said, these companies are doing a great job to help pioneer an emerging industry and while their exposure may be more impressive to some than the actual dollars transacted, they are young companies and that will likely change.
More established firms with existing investor networks and access to high quality investment offerings are entering the space or exploring how to enter. The common goal is to grow their institutional and accredited investor networks by leveraging the online model, and create efficiencies in their business via process automation (when possible). There won’t be one big winner in “Real Estate Crowdfunding”, the industry will remain fragmented but the ability for solicitation is game-changer for firms with strong track records.
A lot of people refer to crowdfunding only in the context of non-accredited investors but in our opinion any syndication is technically crowdfunding. For the non-accredited investors to benefit from the new legislation, accredited investors need to adopt the model. Angel List (https://angel.co/) is a great example because many high profile and savvy tech investors actively use the platform. If they allow non-accredited investors in the future that would be great.
Title II – Rule 506 (b) and Rule 506 (c) are the compliance of interest to US groups. Rule 506 (c) allows for solicitation so if your legal team is OK with it, its great (learn more).
Title III – the compliance of interest to everyone with even a slight consideration to allow non-accredited investors. Many groups aren’t interested in $300 investments but many that don’t qualify for accredited status still have money i.e., $50,000 commitments. Depending on your deal sizes this may or may not be an interesting option.
All companies are different, the offerings are structured different, and how they monetize their investment opportunities are different. There is a lot of confusion whether groups need to be a broker-dealer to operate a platform and take transaction fees. Approaching your platform concept with the assistance of a securities lawyer can help determine the best methods to handle the financial transactions from the platform. Many groups are doing debt deals and not equity participation.
Depending on the structure of a deal and the company’s status with the SEC (for US based) there are different payment services available for very low transaction fees. Whether you require escrow or not presents other considerations.
International awareness and demand is growing. Many groups are looking at international growth by accessing investors looking for US assets. Platforms like Eureeca.com in the Middle East are fairly well known and provide a good reference point to investors from those areas. Depending on your investor profiles (and compliance) the international aspect may or may not be of interest but it opens the possibilities.
The industry is dynamic, exciting, and disrupting an industry with more efficient processes, powerful investor tools, and the ability to leverage online exposure.
As a software provider for real estate crowdfunding platforms, we are fully entrenched in this space and hopefully we can educate others and contribute to the growth and success of many companies.
Stay tuned for more updates in the coming months!
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Increase your organization’s profile and gain access to a dynamic group of industry front runners. Learn more About Us or contact us at casano@ncfacanada.org.
Public Policy Initiative at the Wharton School of the University of Pennsylvania by Professor Ethan Mollick | September 2014
This article was originally published in Volume 2, Number 8 of the Public Policy Initiative journal at the Wharton School of the University of Pennsylvania by Ethan Mollick, PhD (Assistant Professor of Management, The Wharton School).
To date, almost all of these funds have been given either as donations or in return for some future reward. This approach, commonly called reward-based crowdfunding, treats backers as patrons, rather than investors, of the projects they fund. In return for their donation, backers get a reward from the project creators. This can include being credited in a movie, having creative input into a product under development, or receiving the opportunity to meet the creators of a project. Alternatively, reward-based crowdfunding treats funders as early customers, allowing them privileged access to the products produced by funded projects at an earlier date, better price, or with some other special benefit. The “pre-selling” of products to early customers is a common feature of those crowdfunding projects that more traditionally resemble entrepreneurial ventures.
With the success of reward-based crowdfunding as an example, in 2012 Congress passed the Jumpstart Our Business Startups Act (The JOBS Act). The JOBS Act makes a number of changes to security laws, and a substantial effect of the legislation, under Title III, is to legalize equity crowdfunding. This allows companies to use crowdfunding to raise money in return for equity, rather than restricting fundraising to a patron model.
While the SEC has yet to finalize regulations on crowdfunding under the JOBS Act, it is not clear that the current draft regulation will do much to make crowdfunding a useful tool to encourage innovation and job growth, as it makes equity crowdfunding too expensive and difficult. For example, Crowdfund Capital Advisors used estimates from the SEC to determine that raising $100,000 under the JOBS Act would result in up to $39,000 in compliance fees, and that raising larger amounts would still require that almost 8% of the proceeds go to fees. Further, even if the regulation changes, I worry that both the SEC and many of the other players in the space are paying too much attention to the “funding” piece of crowdfunding, concentrating on creating a new financial vehicle. My research shows that the true revolutionary power of crowdfunding is instead the “crowd”—and that only by refocusing on the crowd, and understanding its value, will equity crowdfunding lead to improved innovation, more jobs, and better outcomes for investors and entrepreneurs alike.
The true power of crowdfunding is its ability to democratize entrepreneurship. Currently, access to startup capital is tremendously limited. Overwhelmingly, the companies that receive venture capital investment are founded by white males; less than 3 percent of VC-backed companies have female cofounders, and only 1 percent of VC-funded startups are founded by African Americans. Further, VC is highly concentrated, with most investment occurring in just a few locations, particularly the San Francisco, Boston, and New York metropolitan areas. This lack of diversity is problematic on its face, but even more so if you follow the overwhelming evidence that innovation can come from anywhere. Rather than drawing our entrepreneurs from across the nation, the current funding system only truly works for a very small segment of people.
On the other hand, as can be seen in Figure 1, crowdfunding projects are distributed across the country. Further, the typical disadvantage faced by women in raising VC funding is completely reversed in crowdfunding. All other things being equal, women are 13 percent more likely than men to succeed in raising their goal in a crowdfunding campaign because they are helped by other women. This suggests that crowdfunding may truly democratize access to capital, if done correctly.
Further, crowdfunding can lead to the creation of real companies and jobs. A previous survey of design, technology, and video game projects that raised money on Kickstarter before mid-2012 found that non-equity crowdfunding can indeed support more traditional entrepreneurship. A very high percentage (over 90%) of successful projects remained ongoing ventures, 32 percent of which reported yearly revenues of over $100,000 a year after the Kickstarter campaign (10 percent of these represented ongoing companies that already had been making that much). Further, successful projects added an average of 2.2 employees per project—and this does not include outliers like Oculus VR, sold to Facebook for $2 billion, which did not respond to the survey. The survey also suggested that crowdfunding did much more than provide funds, unlocking the ability to reach customers, press, employees, and outside funders.
Crowdfunding, then, is more than a theoretical source of opportunity. The research shows that it actually does increase opportunity and helps lead to the establishment of real companies, even though crowdfunding remains limited to giving away rewards, rather than equity. The SEC and Congress need to consider the positive impact of crowdfunding on entrepreneurship and innovation, which lies in the relative ease with which individuals, even unlikely individuals, can raise funding for good ideas. Focusing purely on crowdfunding as an investment model might lead to the creation of regulation that reduces the ability of crowdfunding to democratize startups, again limiting funding to the well-connected few. Trusting the crowd in crowdfunding means not just paying attention to innovators, but also to the way the crowd effectively funds legitimate projects in what is currently a nearly unregulated market.
One of the big surprises of reward-based crowdfunding is that, contrary to expectations, fraudulent projects are rare. Previous research indicates that the amount of money pledged to projects that ultimately seem to have no probability of being delivered accounts for less than 0.1 percent of all pledged funds. This is despite the fact that reward-based crowdfunding sites have few if any formal controls against fraud beyond an initial screen by the reward-based portal.
Fraud is so low not because of registration requirements, but because the community of investors plays a critical role in detecting and deterring fraud. On sites like Kickstarter, investors look for signals of quality, and are more likely to fund projects that show signs of the ability to succeed, such as clear plans for future development, and appropriate backgrounds, past experience, and outside endorsements of the project creators. The crowd can be quite sensitive – a single spelling error decreases the chance of funding success by 13 percent. This process works because many individuals (with verifiable real-world identities) weigh in on projects, discussing the merits and probability of success of each project. These discussions take place on Kickstarter, but also on other social media sites, blogs, and forums. The result is that comments on potential issuances are made not just by investors, but also by outside experts, communities of interest, and journalists. These online communities play several important roles in improving offerings, preventing fraud, and making crowdfunding successful.
First, they allow a core-periphery dynamic to develop, similar to that seen in other functional online communities, ranging from Wikipedia to open source software development. Having many people examining issuances from the periphery, even if they may not all be core investors themselves, greatly increases the chance that someone will have the expertise and desire to spot potential issues with a proposal. In the case of Kickstarter, communities have successfully detected fraudulent projects, and had healthy debates over the merits of other projects that have resulted in projects improving as a result of the feedback. Allowing ongoing discussions between potential investors, community members, and issuers is a vital aspect of avoiding fraud and improving proposed projects. Some of this is already in the draft SEC regulation.
Further, the network effects within communities enable one interested party to draw others into the discussion, adding to the possibility that investors or commentators with appropriate expertise will find the relevant projects where their knowledge would be most useful. Indeed, a decade of research has shown that vibrant communities are key to harnessing the best ideas from a crowd, and to improving existing ideas, in order to create breakthrough innovations. Communities can only form, however, if there are enough quality issuers to attract high-quality community members. Otherwise, there will be little to draw a community to a portal. I would caution against too many formal regulatory filings, as that may actually increase fraud by discouraging high quality issuers with other alternative fundraising options. This will make it hard to gain the interest of community members to portals, and therefore reduce the ability of communities to help detect fraud.
In addition to preventing fraud by issuers, communities with persistent identities can prevent future fraud, including pump-and-dump schemes. If a community around a particular investment consists of known members with consistent identities (something not in the current SEC draft regulation), it will immediately be obvious if outside individuals attempt to falsely promote or denigrate a funded company for fraudulent purposes. The community will be able to detect anonymous outsiders, and community members will have reputational reasons for avoiding these sorts of schemes, or their online identities will become associated with fraud.
Crowds are not just about preventing fraud, however. They also provide ongoing benefits. An analysis of the long-term results of reward-based crowdfunded projects showed that the money raised was not considered to be the most important outcome of crowdfunding.
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Increase your organization’s profile and gain access to a dynamic group of industry front runners. Learn more About Us |About Crowdfunding or contact us at casano@ncfacanada.org.
MicroVentures | via PRNewswire (here) | Sep 17, 2014
AUSTIN, Texas, Sept. 17, 2014 /PRNewswire/ -- MicroVentures, an online venture capital platform, announced today it has raised more than $50 million directly for its portfolio companies, while generating positive returns for its investors through successful exits, such as the recent acquisition of Space Monkey, a cloud data storage company, by Vivint, the largest home automation services provider in North America.
Accelerated growth of MicroVentures will be fueled by new investment opportunities that cater to investors' rising interests, such as late stage pre-IPO companies and real estate. The company's focus includes investments in internet technology, media and entertainment, software, green technology, mobile, social and gaming.
"We set out five years ago to create the user-friendly platform that connects investors and startups at the seed stage," said Bill Clark, founder of MicroVentures. "Today MicroVentures not only connects, but leads investment rounds for our portfolio companies – the first equity crowdfunding platform to play this role. This milestone showcases the viability of the equity crowdfunding business and we look forward to continuing to grow alongside our investors and entrepreneurs."
The more than $50 million raised to date includes investments in successful companies such as Twitter (IPO), Facebook (IPO), Yelp (IPO), Republic Project (acquired), LaunchRock (acquired), and Loom (acquired by Dropbox). Other notable start-ups that are currently part of the MicroVentures' portfolio include Structured Polymers, Soldsie, Biomeme and Oru Kayak, who was featured in the last season of Shark Tank and is actively raising capital via the MicroVentures platform today.
"MicroVentures gave us the opportunity to pitch in front of over 20,000 global investors," said Nathan Derrick, CEO of Supplyhog. "This allowed us to spend less time raising capital and more time growing our business."
Since establishing itself in 2010 as one of the first equity crowdfunding platforms that is a FINRA registered broker-dealer, MicroVentures has grown its investor community from 200 individuals to more than 22,000 individuals. The company has done so through building expertise, security, selectivity, due diligence, personalized customer service and accessibility for both accredited and non-accredited investors. The MicroVentures team is committed to providing confidence for both startups and investors through its dedication to rigorous due diligence and to personal relationships with investors.
About MicroVentures
MicroVentures is one of the financial industry's first organizations which merges crowdfunding with the venture capital industry. The San Francisco, CA and Austin, TX based firm provides an opportunity for angel investors to invest in startups alongside Venture Capitalists, often at the same terms. MicroVentures conducts detailed due diligence on startups and if approved they help the startup raise capital from both accredited and non-accredited investors. For more information, visit www.microventures.com, or follow @microventures on Twitter.
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Increase your organization’s profile and gain access to a dynamic group of industry front runners. Learn more About Us |About Crowdfunding or contact us at casano@ncfacanada.org.