Two Years Since JOBS Act Signed – Americans Still Waiting for SEC to Allow Average Citizens To Participate in Equity Crowdfunding

Over two years ago on April 5, 2012, President Obama signed the JOBS Act into law.  The goal was to support startups and  small businesses by helping them get access to capital in new ways.  While some parts of the JOBS Act are now in place, the Title III section permitting equity crowdfunding for non-accredited investors is still under review by the Securities & Exchange Commission (SEC).  Title III would permit average U.S. citizens to buy ownership in startup companies through crowdfunding.

I commend the SEC’s intention of trying to safeguard the investing public to the extent possible.   I acknowledge that some monetary losses will occur and that some unscrupulous people will attempt to defraud the public.  However, despite these concerns it is past time for the SEC to finalize the Title III rules and release them so that average U.S. citizens can participate in equity crowdfunding…as the wealthy are already allowed to do.

Some might argue that startup firms are risky and that average citizens should not be allowed to take the risk of investing in them.  I completely disagree.  It’s irrational to allow people to enjoy mountain climbing, scuba diving, and skydiving while forbidding them to invest $1,000 in a risky startup company.  I believe in personal freedom and allowing neighbors to invest in neighbors just makes sense.

I recognize that the SEC is coping with complex issues and that some appropriate balance needs to be found that provides reasonable safeguards while granting citizens the freedom to choose their investment. It is also clear that there are thorny details to figure out so that implementation of the rules will establish a viable marketplace. For example, the SEC has to figure out a way to let investors invest through a special purpose LLC and to simplify any long term reporting requirements on the issuers. That said, it’s been two years already and it’s time to move forward.

The Empire State Building was the tallest building in the world for about 40 years and it was built in less than two years.  The Normandy Invasion of World War Two involved over 5,000 ships; over 10,000 aircraft; and over 1,000,000 men.  It took under two years to plan and execute the Normandy Invasion.  The world’s largest cruise ship, Oasis of the Seas carries over 7,500 passengers and crew and was built in less than two years.  All of these incredibly complex projects were successfully completed in less time that the SEC has already spent working on the JOBS Act Title III regulations.

The JOBS Act was intended to support the growth of more businesses to create more jobs and strengthen our economy.  America has a grand tradition of creating new inventions and launching small businesses that spring from garages all across our nation.  Title III of the JOBS Act is the fuel many of these business visionaries need to move forward.  The SEC needs to finish its work so that the rest of us can start ours.

Posted in Equity Crowdfunding | Leave a comment

Crowdfunding on Campus: Part 1

When Gilbert Kipkorir, a student at Vermont’s Middlebury College, heard that a friend in his native Kenya was struggling with school fees, he knew that he had to do something. Because of his familiarity with public crowdfunding platforms, Gilbert created a GoFundMe campaign intending to raise $2,000 for his friend.

“I am very pleased with the response so far,” said Kipkorir. “It’s been really positive.”

But one thing that Gilbert has noticed is that most of his contributions are coming from a specific group: the connections he has made at Middlebury.

“I would say that more than 80 percent of the donations I’ve received are either from people who go to Middlebury or who are affiliated with Middlebury,” he said. “I wouldn’t be able to do it otherwise.”

Students like Gilbert around the country have discovered the crowdfunding model as a natural fit for the tight-knit communities that already exist on their campuses, allowing them to connect to a larger number of donors who are interested in staying engaged in the community.

Gilbert was using his on-campus connections to direct traffic to a third-party website, but what would happen if his college were to cut out the middleman and host its own crowdfunding platform?

Join me on the blog next time when I’ll take a look at some of the creative ways that colleges have been tackling this very question.

Posted in What we Think and Believe | Leave a comment

Why You Should be Paying Attention to Real Estate Crowdfunding

When many people think about crowdfunding, they think about an effective way to fund smaller-scale projects: maybe a film, gadget or some other creative project. While you’ll still find plenty of these on Kickstarter, it is real estate that is quickly moving to the forefront of the crowdfunding world.

Real-estate crowdfunding – in which issuers use 506b or 506c offerings to fund real-estate ventures – has exploded of late and, as Entrepreneur reported last week, some big names in venture capital are beginning to take notice.

In this model, investors pool money until they are able to purchase a property or group of properties, then take a share of the rent and any profits from the property’s eventual sale. Investors benefit from the greater transparency of the crowdfunding model, which in turn has the potential to increase the accessibility of the real-estate investing market. Like in other areas, only accredited investors can engage in real-estate equity crowdfunding across state lines, but several states have already passed provisions opening the marketplace to anyone in the state.

Check out how the Launcht 506 Offering System offers everything you need to launch your own real-estate platform.

Posted in Current Events in Crowdfunding, Equity Crowdfunding | Leave a comment

Transactions and Evaluations in the Equity Marketplace

Equity crowdfunding has the potential to open up a wide range of opportunities to investors of all sorts. To those who are new to crowdfunding, this openness can be a cause for concern, as it is not intuitively obvious that any offering in such an open marketplace can be verified with absolute certainty.

So how can we ensure that the crowdfunding marketplace is more trustworthy? Two organizations – CrowdCheck and Bancbox – have been doing just that.crowdcheck

By conducting due diligence on issuers, CrowdCheck helps investors verify the legitimacy of an investment before they commit to it. With the services offered by CrowdCheck, investors can be sure from the beginning that nothing in the offering has been misrepresented, creating a more transparent marketplace for investment.

In addition to their money-movement services, Bancbox helps organizations evaluate and verify the financial background of potential investors. According to the standards imposed on 506c offerings, organizations that generally solicit their offering are required to verify that investors are accredited; Bancbox’s new API methods allow them to do so simply and without breaking the bank.

Learn more about the 506c regulations and how the Launcht equity platform can help you navigate them.

Posted in Current Events in Crowdfunding, Equity Crowdfunding, Uncategorized | Leave a comment

The Dollars and Sense of Crowdfunding for Nonprofits

We can offer glowing client testimonials until the cows come home, but probably the single most effective piece of information for non-profits considering jumping into the crowdfunding arena is just this: it works.

Crowdfunding InfographicA recent infographic by Craig “Craig’s List” Newmark’s organization makes it clear that, in terms of dollars, cents, and common sense, crowdfunding is an extremely effective, profitable, and growing field for nonprofits. Admittedly, the data used was gathered from Launcht’s competitors in the crowdfunding platform world, but if we’re all here to democratize access to capital, it makes good sense to democratize and highlight access to good information on this topic as well.

As Craig’s infographic highlights, organizations who use an outside company (ideally, of course, Launcht) to set up their crowdfunding platform raised an average of 1730% more than nonprofits who decided to set their crowdfunding site up in house. Given that difference, and realities of the non-profit world where mission and ideals often far outpace practicality and budget, the investment in crowdfunding professionals seems worth the upfront cost.

It is not just software that crowdfunding platforms offer their clients, but also the guidance, support, and relative expertise in this nascent, dynamic and enormously successful field. Having professional experience with what works and what is more challenging, crowdfunding platforms are able to work closely to merge that knowledge with the practical needs and idea-driven passions of their clients. The financial benefits of this collaborative approach seem to increasingly augment—if not outweigh—more traditional modes of nonprofit fundraising.

If your organization is interested in exploring crowdfunding, check out the statistics on the infographic, and read some of the testimonials from our nonprofit clients—clients who crowdfunded everything from building schools in Africa to set up Skype-support programs for adult caregivers—and decide if this brave new world is for you. We hope it is.

Posted in Uncategorized | Leave a comment

Faith Based Crowdfunding with WeRaise

For nearly sixty years, Wheat Ridge Ministries has provided grants to Lutheran organizations to fund projects all over the world. Last fall, as a way to grow their proverbial church collection plate, Wheat Ridge created WeRaise, a Christian crowdfunding site. While the organizations and projects accepted for WeRaise still align with basic tenets of Christian faith, Wheat Ridge is able to for the first time to grow beyond the Lutheran faith community.WeRaise

Abigail Miller, Wheat Ridge’s Manager of Crowdfunding and Social Media, explained that this expansion really widens the scope of what projects Wheat Ridge can support—that the specific theology behind why a Christian group might be called to open a soup kitchen matters less than what monetary and logistical support is needed to set up the soup kitchen. “Basically, as long as you believe in Jesus and want to help people, we’re interested in helping you,” said Miller.

Traditionally, Wheat Ridge has accepted applications from Lutheran organizations and given out grants to support various projects. Crowdfunding, Miller explained, was another, often more immediate way to “empower more people to take a leap of faith in filling the needs they see in their community or the wider world.” WeRaise’s new video is available here.

Wheat Ridge has not turned into an entirely crowdfunded operation—grants are still available for Lutheran organizations to apply for. However, those same grants are also available for projects that have demonstrated success through their WeRaise campaign. With this sort of continued support, oversight, and continuing grant potential, WeRaise is unique among leading Christian crowdfunding platforms.

Additionally, while donors are supporting whichever specific project they choose, their donation goes to Wheat Ridge, which then presents the project or organization with a grant for the amount raised. This allows WeRaise and Wheat Ridge to provide further support, oversight, and shepherding to the often very nascent projects and organizations, so of like keeping training wheels on as both the projects and WeRaise grow into the crowdfunding sphere.

Miller commented that opening Wheat Ridge’s existing donor base up to crowdfunding has been an overall positive experience. “Our donors have been so excited about WeRaise! In creating a tool to empower leaders, we’re also connecting with donors in new ways.” In order to test the waters with WeRaise, most of the first projects accepted came from within the known, familiar Lutheran community. This allowed existing donors the ability to connect with the new technology in familiar territory, and, as the projects now expand into the wider world of Christian crowdfunding, there is an existing support network for the project leaders. Several generous and enthusiastic donors have become specifically interested in supporting any projects that they personally connect with, going so far as to promise to donate a set amount to any WeRaise project that supports youth ministries or sabbaticals, for example.

Miller said that perhaps the biggest challenge she has faced with crowdfunding is educating community members that crowdfunding is not a new revenue source. WeRaise is a means to raise funds for various projects, not a way to increase Wheat Ridge’s own income. That disconnect, along with the inherent dynamism of being at the forefront of a relatively nascent addition to fundraising, were the primary pieces of advice she had for anyone interested in jumping into crowdfunding.

And, the benefits far outweigh the challenges. Miller spoke of meeting with teenagers at a community event who immediately grasped the potential of crowdfunding. “Everyone is trying to figure out how to connect with younger demographics and this is it! It’s really exciting to be part of this and Wheat Ridge loves having created this tool for growth.”

Posted in Client Testimonials, Current Events in Crowdfunding | Leave a comment

Florida Funders Brings Launcht Equity Platform to its Members

Florida Funders – an online portal linking Florida based investors to Florida based tech entrepreneurs – recently opened an equity crowdfunding marketplace for member investors to consider and fund startup companies. Florida Funders worked with Launcht to build and launch the 506 offering platform.

As a group of angel investors focused on keeping high growth startups in Florida, FloridaFunders provides a medium for entrepreneurs seeking capital to get their ideas in front of the right potential investors. The platform allows those investors to gauge group interest and pool their resources to help chosen startups succeed.BancBox Logo

Following the emerging industry standard in the investment crowdfunding model, Florida Funders uses electronic ACH processing and funds escrow service Bancbox that is integrated tightly with Launcht to pool funds from investors and distribute those funds to the startup, in the case of a successful raise. With Bancbox and Launcht, they are able to leverage the group resources of their members in order to more efficiently facilitate the connection of entrepreneurs to needed capital.

In addition to providing flexible, high-growth opportunities for accredited investors, Florida Funders aims to create a network of successful startups and funders and thus to promote entrepreneurship in the state.

Posted in Current Events in Crowdfunding, Equity Crowdfunding, New Partner Platform Launch | Leave a comment

Following Up with Mandy Calara, CEO of CrowdFranchise

CrowdFranchise Logo

Last week, I talked to CrowdFranchise CEO and Founder Mandy Calara about his company’s recent closing on a deal to bring a crowdfunded frozen yogurt chain to Chicago.

In the eyes of Calara, franchising was a natural candidate for crowdfunding because of the large unmet need he saw for a model that could accommodate smaller-scale investors.

“As a franchisor, we can’t do anything with 90 percent of the leads that we get because they can’t qualify financially,” he said. “This is now our pitch for the franchisor: don’t throw away that lead, let’s put them into a CrowdFranchise program.”

Calara sees potential for the equity crowdfunding model to expand into other new arenas, just as he has expanded it into franchising. “There are probably 25-plus valid equity-based crowdfunding website so far, and those are all catered to just two or three areas.” As for his own company, Calara foresees taking a more holistic approach to crowdfunding in the franchise sector.

“We’ve been trying to put together an incubator program for people to not only get the finances, but also make the connections after the finances are raised,” he said, “and to encourage people to turn their businesses into franchises as well.”

Learn more about investment platforms from Launcht.

Posted in Equity Crowdfunding, New Partner Platform Launch | Leave a comment

Vassar College Crowdfunding Success Story

February 20th was a big day at the Vassar College Office of Alumnae/i Affairs and Development (OAAD). Not only did they raise nearly $150,000 in a single day of crowdfunding, but, as Senior Director Willa McCarthy explains “it was a blast!”
Not the first words that come to mind for most major fundraising initiatives.

A very complete case study about the enormously successful campaign is available here but the highlights include 1229 donors with participation from every class since 1945!

OAAD is a Launcht client and in an effort to help us here at Launcht learn the secrets of this campaign’s success–and pass them on to other clients– McCarthy was gracious enough to speak specifically to how Launcht’s software and people-power contributed to that success.

First, McCarthy noted that donors are looking more and more for an Experience when they donate. Her office sought to build a way for alumnae/i to donate online, but in doing so “to create an experience, to make it more fun than just clicking bubbles on the screen and waiting for your letter in the mail.” As anyone knows, online giving can become almost too complicated to bother—McCarthy was interested in reducing that friction and making the whole experience more interactive.

With Launcht’s specially built software, OAAD was able to build a site that allowed a number of donors, rather than a number of dollars, to be the goal of the 24-hour fundraising event. Visitors to the site were able to see the donor counts changing in real-time, which gave them a reason to come back to the site: the satisfaction of seeing their donation—whatever the amount—increase the total number of donors. As McCarthy said, “very little is as compelling as seeing what happens…it really galvanizes a spirit of community.”

The February 20th campaign was originally designed with hopes of bringing in 500 donors to the Annual Fund. Once that donor-goal had been reached, a generous three-generation Vassar family pre-agreed to donate $175,000. The campaign reached its 500 donor goal within the first four hours. With 20 hours to go in the campaign, the OAAD upped the ante to 1000 donors, and the donations kept pouring in, via crowdfunding and telephone, and they are still trickling in now, by mail.

McCarthy and her team opened the campaign up to the off-line crowds as well, due to the concerns that some donors expressed about giving online. She was quick to point out that through the entire process of the campaign—from planning to the post-campaign debriefing about how to move forward with this experience—Launcht has been “with us, the entire way.” She mentioned being online and emailing with Launcht staff until 10:30 at night as everyone prepared for the big day. “Launcht was really a partner in our learning process and it was great to feel that level of above and beyond rapid responsiveness as our needs and goals changed.”

McCarthy’s advice for people organizing similar sorts of fundraisers is to set up as much in advance as possible. In future crowdfund-based campaigns, she plans to use more phone staff to field the calls of people–mostly older alums–who are not comfortable with online giving, and to think about broadening the donor base. “We had parents and current students who wanted to donate, but we kept it just alumnae/i for this campaign. In the future, we might change that.”

If the combination of crowdfunding and traditional fundraising works as well as the OAAD campaign, it makes sense to include as many people as possible. Who wouldn’t want to have a blast contributing to a community they love?

Learn more about University Crowdfunding solutions from Launcht.

Posted in Client Testimonials, Current Events in Crowdfunding, New Partner Platform Launch, News | Leave a comment

Unreasonable Institute East Africa launches crowdfunding portal

Every corner of the world has its own host of challenges. Or, Joachim Ewechu, CEO and co-founder of The East Africa Unreasonable Institute, said in a recent interview, “The more we look at all these challenges as great opportunities and stop complaining but rather ask ourselves what we can do about it, then we are on the right course to development, we are on the right course to equality, we are on the right course to improved livelihood.”Unreasonable East Africa

2014 marks the first year that the Colorado-based Unreasonable Institute is expanding to both Mexico and Uganda, where East Africa Unreasonable is based. (See earlier post regarding the Unreasonable Institute.) At present, fourteen entrepreneurs in Uganda, Kenya, and Tanzania are crowdfunding to raise their tuition as Fellows this summer. The entrepreneurs’ projects highlight the diversity of opportunities available for improving lives and livelihoods in East Africa, from solar energy to feminine health. The full marketplace of Fellows, which Launcht is delighted to partner on, is available here.

Ewechu expressed excitement over how this first group of exclusively East African Unreasonable Fellows are rising to the particular opportunities of their region, “Everyone has talked about how Africa is the next frontier. The challenges we face here are huge opportunities for entrepreneurs. If there is a lack of quality affordable health care, that is an opportunity for an entrepreneurs to set up a chain of hospitals or clinics to bridge this gap. If there is lack of food and starvation, that is an opportunity for a farmer to grow more food and sell the surplus. If there is a problem in the lack of clean cooking energy, then this is an opportunity for an entrepreneur to create a company that provides this access”

To engender this transformation from challenge to opportunity, East Africa Unreasonable will run on the same model as the Global Unreasonable Institute. The entrepreneurial Fellows will spend five weeks this summer living together and learning from experienced entrepreneurs in their fields, connecting with a network of potential investors, and gaining crucial experience to provide them with an unreasonable advantage to succeed in an unreasonably challenging environment. “By having our 14 awesome entrepreneurs living in the same house and sharing with over 50 well accomplished mentors under the same roof, we are creating a family of entrepreneurs,” explained Ewechu.

Ewechu highlighted that there are three main sources of support that budding entrepreneurs need to reach sustainable success: “You need to provide the mentorship which is the knowledge and you need to provide the access to capital as well, and lastly, you need to provide them with a network of support to take them the long way.”

With nascent entrepreneurs, one of the chief learning experiences has been to give projects an appropriate amount of capital—Ewechu mentioned that some investors tend to provide more capital than a new venture is able to use effectively, “most impact investors doing investments ranging from 250k to 5 million dollars and yet the entrepreneur and ventures here need just between 10k-50k.” By facilitating real relationships between the Fellows and investors, East Africa Unreasonable educates the investors, as well as the entrepreneurs, about the ways in which mentorship can be of a deeper value than capital alone.

As the 2014 class of Fellows comes closer to reality, Ewechu is “most excited about all our entrepreneurs. I am moved by their work, their dedication, their impact, their passion for what they are striving to do. Their stories, keep me motivated to work eighteen-hour workdays without tiring. I am excited about working with them and helping them grow all their ventures by tenfold. They are the reason we do the work we do and the impact is truly inspiring.”

And, work like East Africa Unreasonable and the Global Unreasonable Institute overall, are the reasons that Launcht does the work we do.

 

 

 

 

 

Posted in Client Testimonials | Leave a comment