After initial rejection from Hollywood studios, the creators of canceled TV-show ‘Veronica Mars’ turned to Kickstarter to fund a film version.
Crowdfunding for equity is a hot topic right now. Much of the discussion centers around the JOBS Act, which is currently under deliberation by the U.S. Securities and Exchange Commission (SEC). Across the pond, however, equity-based crowdfunding has already taken off.
Last week, we spoke with Alysia Wanczyk, marketing director for the U.K.-based crowdfunding platform Seedrs, to learn about the company’s progress and plans for the future. The first part of that discussion is available below; part two will be live on Crowdsourcing.org later this week.
Eric Blattberg, Crowdsourcing.org: Could you provide a brief introduction to the platform for our readers?
Alysia Wanczyk, Seedrs: Seedrs started in 2009. Our cofounders met while studying at Oxford in the UK. One is Jeff Lynn, our CEO. His background was in securities law, [first] in the U.S. and then in the U.K. And the other cofounder, Carlos Silva, was an ethical financial services hacker, so he’s very well versed on security and finance. It was really Carlos Silva’s idea to open up investing to the masses. So with his and Jeff’s background, they thought, “Actually, yeah, let’s give this a go.” So they started embarking on the Seedrs journey.
They spent about 18 months preparing for Financial Services Authority (FSA) authorization. They wanted to open up investing in private companies to the masses, and when you’re opening up securities, you need to be regulated. So they underwent that in 2009, and then once they submitted the application, it took another 13 months to receive authorization. So in May of 2012, we became the first crowdfunding platform in the world to receive regulatory approval. Essentially, in July of last year we launched to the UK, allowing anyone to invest as little as £10 pounds into the seed stage startups on our site, and allow those seed stage entrepreneurs to raise up to £150,000 pounds of capital from their friends, family, another independent investors.
Not to get too off track, but what does being an ‘ethical financial services hacker’ entail?
Well Carlos [Silva] tries not to talk too much about it, but essentially he found flaws in financial institutions’ websites and then let them know, so that he could set up meetings with them to fix them. So he didn’t do it for evil, he did it for good.
Well that’s good! (laughs) So what benefits does being FSA-certified offer Seedrs and its investors?
The authorization itself offers some credence and prestige to what we’re doing; it shows that we’re legitimate platform. We very much took the approach when launching that our main focus of driving growth was going to be investors, and so to build up the relationship of trust and credibility with them, we had to be authorized.
[The authorization] was very hard to get, but we’d very much love to see more and more platforms become authorized to really help develop the marketplace. And actually, while there’s so much going on in the U.S. with the JOBS Act, the U.K. is really forward thinking and ahead of the curve on equity crowdfunding. There’s us and there are a few other platforms coming up with FSA authorization, and we think that’s great for developing the marketplace. The securities regulations in the U.K. are flexible enough to make authorization easier than it is in the U.S.
FOR IMMEDIATE RELEASE
March 8, 2013 – Chicago, Illinois – K-HERO Clothing a Cancer awareness brand launched an Indiegogo.com crowdfunding campaign to raise funds to support it’s fight against Cancer. Indiegogo an industry-leading crowdfunding platform gives a unique opportunity to K-HERO to further it’s goals of; Increasing Cancer Awareness, and Funding Cancer Research. The campaign can be found at http://www.indiegogo.com/projects/the-k-hero-project-join-the-fight-against-cancer. Through this campaign K-HERO hope to increase it’s profile and it’s ability to help raise cancer awareness and fund cancer research.
“The more t-shirts K-HERO sells, the more money we can give to the people doing the most important research to cure cancer.” Said Brent Magnussen K-HERO founder “Wear a statement, and make a difference. Join the fight against cancer!”
With the funds raised K-HERO will update it’s eCommerce system and build a cutting edge interactive website, increase standing inventory and create new designs for men, women, and kids. These designs will be done by young hungry designers who are just starting out and have not had a chance to shine in the industry. K-HERO will give them that chance. K-HERO will offer new designs on t-shirts, hoodies, socks, hats, and other apparel by May of this year.
K-HERO also intends to purchase the necessary equipment to print it’s own shirts. As a company we want to give you the best product possible and by controlling every step in the t-shirt printing process we know you will be getting the highest quality apparel. This will save K-HERO money and increase the increase the funding we can contribute to the people doing the most advanced work in cancer research.
Tell your friends and co-workers about The K-HERO Project. Tell anyone you know that has been affected by cancer and make some noise about our campaign. Join the Fight, and help support K-HERO and the fight against cancer.!
ABOUT K-HERO CLOTHING COMPANY
K-HERO Clothing Company was inspired by Karen Magnussen who fought stage 4 cancer for 4 years. She was amazing and her fight inspired her son Brent to start K-HERO Clothing to continue her fight against cancer in the same way. Fearless, with a smile, positive, and never quitting… in 2009 after a courageous struggle Karen Magnussen lost her fight with cancer, but the memory of her struggle lives on in K-HERO Clothing .
Trina Spear, 29, graduated in 2011 with an MBA from an elite school and a hefty $170,000 in student loans. The debt was the reason she took a job in private equity rather than start her own company. “For someone coming out of Harvard Business School, people think you have every opportunity in the world to do everything you want in life,” she said. “[But] you really feel like you’re handcuffed and you have to go to the big corporate job.”
TRINA RAISED MONEY FROM INVESTORS IN EXCHANGE FOR EQUITY IN HERSELF
Two weeks ago, Spear moved to Los Angeles to join FIGS Scrubs, a startup she co-founded that’s attempting to freshen up the medical apparel industry. She was able to quit her big corporate job at Blackstone Group thanks to 13 strangers who invested $20,000 in her future in exchange for one percent of her pre-tax income over the next ten years. The money will cover her $1,500 monthly interest payment and hold her over as she raises $1 million in venture capital for her startup.
It’s called a human capital contract, in which an individual raises money from investors in exchange for equity in herself. The idea is a bit unsettling. It sounds like either a modern version of indentured servitude, or the early version of some dystopian future in which every person is valued in dollars. In the science fiction novel The Unincorporated Man, every human is incorporated and most don’t own a majority of themselves. Their shareholders are their parents, the government, schools, corporations, and investors who bought their equity on the secondary market.
By Phyllis Furman
A local startup is looking to get a head start as it waits for the SEC to spell out rules on crowdfunding.
Rye-based iCrowd, started by former Wall Street portfolio manager John Callaghan and Brad McGee, the ex-chief strategy officer of Tyco International, is one of dozens of companies lining up to get in on the crowdfunding bonanza.
McGee was one of a group of Tyco employees who were handed unauthorized perks by disgraced ex-Tyco CEO Dennis Kozlowski, who was convicted and thrown into jail.
The iCrowd co-founder, who was not charged, left the company in 2003 and has since been advising small businesses.
Now he’s waiting for the SEC to set down crowdfundng rules that will allow small businesses to raise up to $1 million a year from Main Street investors. Once that happens, iCrowd intends to become a registered crowdfunding portal.
These types of crowdfunding sites are expected to charge companies anywhere from 8% to 15% of the money they raise.
In the meantime, iCrowd is looking to assemble a community of small business owners and potential investors. The startup has just launched a free social network to connect entrepreneurs with peers, mentors and experts.
By Devin Thorpe
Crowdfunding is not just about creating jobs, it is about creating jobs for the right people. In April of 2012, President Obama signed the JOBS Act into law, authorizing crowdfunding of equity and debt for the sake of creating jobs. The more time I spend studying crowdfunding and working with the leaders in the crowdfund community, the clearer it becomes that not only will crowdfunding create jobs, it will create jobs in the right places.
Recently, I sat down in a hidden valley near Park City, Utah with Candace Klein, CEO of Somolend and founder of the nonprofit Bad Girl Ventures, who explained that overwhelmingly, the people were polled about crowdfunding indicating a desire to raise capital are women, African Americans and Hispanic Americans. In other words, crowdfunded capital will flow to entrepreneurs in the communities that have been most disadvantaged in America.
According to Klein, women own over 50 percent of the businesses in the United States but receive less than 5 percent of “traditional capital” and less than 3 percent of venture capital. Klein notes that she founded Bad Girl Ventures specifically to address this problem. BGV has funded 45 women-owned businesses with a total of $5 million, but also had to turn away thousands of women. This inspired Klein to launch Somolend so that she could provide capital to thousands of women owned businesses. This also allows “women investors to build their own wealth,” she notes.
Peak Energy Company follows President Trump’s lead, commits 25MM to Illinois Basin acquisitions, 500 jobs to be created. Trump targeted the nation’s infrastructure during his election night victory speech, saying he aims to make it “second to none.” In response, representatives from Illinois and four other states in the Upper Midwest are working to make sure their projects become a priority.
US Energy is on the rise, according to the Energy Department, U.S. production rose to an average of 8.8 million barrels a day in the fourth quarter after dropping below 8.7 million barrels in the third quarter. The department forecast increases to 9.2 million barrels a day this year and 9.7 million – a possible record – in 2018 in a market outlook issued Tuesday.
In response Peak Energy company has commited 25MM to acquisitions in the Illinois Basin. Founded in 2011, and debt free, Peak uses a conservative Warren Buffet strategy of investing by acquiring producing oil assets at a discount.
“If it’s not on sale, we don’t buy it.” Todd Allen, President of Peak Energy “The state of Illinois has been hit hard economically and deserves more jobs, this great state needs to get economy moving, we are here to support that effort by hiring local workers.” Peak’s focus is providing income and secure oil investments for its capital partners.
By Candace Klein
Friday, April 5 marks the one-year anniversary of the signing of the Jumpstart Our Business Startups (JOBS) Act into law.
Unfortunately, key provisions of the act have yet to go into effect, thanks mostly to the political quagmire resulting from turnover within the leadership of the U.S. Securities and Exchange Commission. The departure of Mary Shapiro as Chairman of the SEC on November 15 was followed by the appointment of Elise Walter to replace her on December 11. Now Mary Jo White waits to take over for Walter. Combine this with significant SEC staffing changes and the fact that SEC Commissioner Paredes is about to run up against his term limit, and you have one heck of a bottleneck.
It’s been surprising to me that the regulatory process has been so hard to navigate and has taken so long. Because the legislative work of getting the JOBS Act passed was remarkably smooth and speedy.
My own involvement began with my work with Senator Jeff Merkley (D-Ore.) on the audit requirements section of the Entrepreneur Access to Capital Act. I felt like I was really on the inside-;but my company was about to run out of money.
I had been running SoMoLend, a debt-based crowdfunding company, since May 2011. I raised some seed funding in September 2011, but it was a challenge, to say the least. Most of my potential investors didn’t believe that debt crowdfunding would ever be legalized.
In January 2012, at an event in New York, I met Congressman Patrick McHenry (R-N.C.), Jason Best, a principal at Crowdfund Capital Advisors, and Vince Molinari, the CEO of Gate Technologies. Each of us had been working on similar legislation independently. We started working together and began to make some real progress.
Yesterday, the SEC recognized social media as an acceptable way to distribute information to shareholders. In the press release the SEC referenced the company Netflix in which spurred the question of whether or not it was ok to submit company announcements via social media. So what could this mean for equity crowdfunding investors?
Although Netflix is no longer a start up company. The news from the SEC to allow companies to submit company announcements via social media is a great step forward for investing in equity crowdfunding and equity crowdfunding sites. Virtuous Vodka a startup that received funding from the equity crowdfunding site “Funded by Me” out of Sweden currently has a private Facebook group for all equity crowdfunding investors. Below highlights the Pros and Cons of investing in equity crowdfunding companies that utilize social media.
– Distributing company announcements via social media can be much cheaper for the company. (no one reads snail mail anymore these days anyway)
– Quicker distribution. It doesn’t take much to write a facebook post. The CFO could even post from a cell phone to alert all equity crowdfunding investors)
– Additional collaboration with stakeholders all together in one place on the internet can produce ideas, suggestions, and additional resources for increased company success, as an equity crowdfunding investor this can be huge especially in small startup companies.
– Equity crowdfunding sites will bring a lot more investors. Social media announcements could get you the information faster than the competition.
– Not every equity crowdfunding investor has a Facebook or wants one either.
– With easy access to investors, companies can send information overload. (Not that we don’t want to hear about the CEO’s grand daughters dance competition, but that might be information overload)
– Security issues can easily arise. While Facebook is actually somewhat secure. It wouldn’t take much for information to get in the wrong hands with that savy equity crowdfunding investor leaves his social media account open on a public computer and forgets to log out.
Crowdfund leader launches film crowdfunding management services, starting with eight films and top indie film companies such as MadChance.