In the News – Page 7 – Crowdfunding Professional Association

What the Heck is Crowdfunding?

Crowdfunding: the process of raising money to help turn promising ideas into business realities by connecting investees with potential supporters. Often using the Internet to reach possible investors, the process involves offering goods, such as a key chain or t-shirt, in exchange for a contribution to help a business get started. This process gives entrepreneurs a chance to test the marketability of their venture. They can set a deadline for reaching a fundraising goal. Some make, even exceed, their goals, others don’t. They can gauge the potential for a successful start-up of the business based on the public’s response to the request for support.

But crowdfunding is about to go to a whole new level.

“The current model is effective for the right projects,“ says Mark Hagar, a primary partner of First Break Funding LLC. “But the landscape is changing.”

Hagar says that as a result of the April 2012 JOBS Act, entrepreneurs can soon crowdfund their businesses using equities rather than goods in exchange for money.

Crowdfunding is the Real Deal – a Report from the Crowdfunding Bootcamp

The first annual Crowdfunding Bootcamp co-sponsored by the Crowdfunding Professional Association and Funding Roadmap was held this week in Henderson, NV. In attendance were over 300 investors, entrepreneurs and members of the crowdfunding industry from eight countries. The conference produced some unique insights, and from our vantage point we can already see trends developing in this nascent industry.

When President Obama signed the JOBS Act into law on April 5, 2012 we knew the battle had been won but not the war. The legislation provided the SEC with 270 days to issue the rules for crowdfund investing (aka equity or debt-based crowdfunding) to operate. Soon after, we learned that the industry would fall under the oversight of FINRA. In an attempt to provide a united industry voice for portals, investors, entrepreneurs, and third-party providers two industry associations were formed, The Crowdfunding Professional Association (CfPA), focused on investor education and representation, and Crowdfund Intermediary Regulator Advocates (CFIRA) began actively engaging with the SEC and FINRA to provide accurate and timely information from the industry during this rule-making phase of the process. This conference organized by Ruth Hedges of Crowdfunding Bootcamp was the first time members of all of the associations came together to share best practices, educate entrepreneurs and plan for the future.

Alternative investment: Crowdfunding

Innovation was urgently needed to provide small and emerging businesses with alternative ways to raise sums of funds outside of the traditional financing methods. In December 2011, British MP Vince Cable launched a taskforce to open fresh funding channels for small UK business.

Shortly thereafter, on 5 April, 2012, the US government, with the involvement of only a handful of entrepreneurs, enacted the Jumpstart Our Business Startup ACT, Title III (JOBS Act). “This legislation marks an important moment in US history,” remarks Sherwood Neiss, one of a handful of private sector advocates that worked with Congress to draft the legislation, “the JOBS Act was truly a bill written by seasoned entrepreneurs for Main Street entrepreneurs.”

A Congressional vote with 390 supporters spurred this historic moment, placing particular emphasis on the new opportunity for securities-based crowd funding, which allows small and emerging businesses to raise up to US$1 million in a 12-month calendar year via the internet using an Intermediary (portal or broker).

Crowdfunding Professional Association Partners with Invest Crowdfund Canada

Crowdfunding provides Canadian entrepreneurs with new alternatives for financing. Equity or Debt financing in Canada via crowdfunding portals is currently not accessible to Canadians.

With the results from the World Economic Forum Report, Canada’s recent drop of two innovation rankings to 14^th place further demonstrates Canada is not taking full advantage of its strong economic fundamentals.

“We are integrating our ICC operation with CfPA to further strengthen our national lobbying efforts coast to coast. This also allows us to bring a National Crowdfunding Association to Canadians, and help us develop skills, competencies, best practices, and grow a new innovation cluster for Canadians. Membership for all Canadians to CfPA is free at this time, says Dr. Cindy Gordon, National Chair, ICC, Co-Founder, SalesChoice, Board Director, CATA.

Silicon Valley Debates the Do’s and Don’ts of Equity Crowdfunding

pile-of-cash Your Facebook friends would love an “Attaboy” from you when they post about their new jobs, or an “Awwww” when they share a puppy picture.

But what will you do when they offer you shares in their startup company?

That expansion of social media is on its way, as soon as securities regulators finish the rules for a new way to float private stock issues—equity crowdfunding.

Congress, by passing the JOBS (Jumpstart Our Business Startups) Act in March, created a number of alternatives to the traditional IPO, or initial public offering, for company financing. One of them will allow entrepreneurs to raise up to a million dollars a year by selling shares in their startups to hundreds or thousands of people they’ll reach through websites and social media networks.

An Interview with David Drake on the Future of Crowdfunding

Crowdfund Insider: You’ve been involved in crowdfunding for quite a while now and were instrumental in the creation of some extremely influential groups. What brought you in?

David Drake: LDJ Capital invested in a conference series called The Soho Loft early summer 2011 (from the name of the Loft I had entertained to clients and customers in Soho for the first 10 years of the 21st century). We were hoping to invite our family office clients and limited partners. The Private Company Marketplace focus with Facebook transactions, broker dealers and institutional investors did not match well with the focused events family offices and LPs sought. We quickly adjusted and before I knew it 6 sub-congressional witnesses and today friends spoke 1-3 times per month for us on the 6 bills underlying the JOBS Act. Suddenly I am lobbying congress and the bills pass. The entrepreneurial spirit came together as I created the first crowd funding panels during our events and I got to meet all the crowd funding leaders nationwide. There was no other conference bringing together all the crowd fund platforms monthly in 2011. We were it globally.

Crowdfunding Stifled at Home, Expands Overseas

Crowdfunding Stifled at Home, Expands Overseas image CrowdWatch banner

Crowdfunding, which pools small donations from large amounts of investors, continues to make large, sweeping global inroads. From a donation site supporting the arts to a value-for-value trade to a platform that investors use to find a return on their investment, crowdfunding is becoming a highly sophisticated and radical game-changer. But as it moves towards a business model that attracts more traditional investors, risk also increases.

In the United States, however, there has been some foot dragging when it comes to the specific rules governing certain types of crowdfunding. The Jumpstart Our Business Startups Act of 2012 gives the Securities and Exchange Comission until next year at the earliest (does it really need to take that long?) to establish those rules. Rather than speed up this ridiculous bureaucratic timetable during the most trying economic times since the Great Depression, the SEC has muddied the process by disputing who qualifies as an “accredited investor.”

At the end of August, the North American Securities Administrators Association identified “Crowdfunding and Internet Offers” as a top emerging investor threat.

SEC Uses JOBS Act to Set Up New Roadblocks to Crowdfunding

Disappointing news came out of the SEC meeting yesterday designed to open the way for crowdfunding in the U.S.

Rather than lifting the ban on general solicitation (we’ll explain that in a minute) in order to make it possible for more people to invest in American startups, the SEC proposed rules that would establish various different classes of investors, each perhaps with its own regulations. Needless to say, this move could make it more rather than less complicated for people to invest in startups, erecting new roadblocks rather than clearing away old ones.

Some quick backstory for those of you who assumed crowdfunding would immediately become legal when President Obama signed the JOBS Act into law back in April:

The SEC has been given until 2014 to spell out the specific rules of crowdfunding.

Oops! Venture Capital Rebirth Delayed by Third Blown Deadline

The Securities and Exchange Commission now says it needs at least another week before it can detail its proposal to rescind longstanding prohibitions against startups advertising that they are seeking investors.

The SEC had been scheduled to consider the changes at its open meeting today following a delay last week. Prior to missing this week’s deadline and last week’s deadline, both self imposed, the commission missed a July 4 deadline spelled out in the JOBS Act, a recently approved piece of legislation that, among various other securities rules, loosens restrictions on how startups can raise money from venture capital funds and other wealthy “accredited investors.” The commission is now slated to discuss the so-called general solicitation rules at a meeting Aug. 29.

Allowing startups to broadly advertise their fundraising will fuel a more diverse ecosystem of investors beyond Silicon Valley’s elite fraternity of venture capitalist and “super angels,” as we wrote earlier this week, and could also make it easier for tech ventures outside the Valley to raise funds. But the SEC needs to clarify exactly what sorts of advertising will be allowed and when the ban on advertising will be lifted. It must proceed carefully: A previous deregulation of startup advertising, from 1992 to 1999, was blamed for an explosion in “pump and dump” scams.

Feds to Break Up Tech Investors Party

A federal regulatory meeting Wednesday is expected to shed light on how aggressively startups can solicit investments and thus reach beyond venture capitalists and other established investors.

At the meeting, Security and Exchange Commission Chairman Mary Schapiro is expected to reveal how the SEC proposes to rescind longstanding rules that bar startups from advertising that they are seeking investments. She is also expected to unveil new proposed rules outlining how aggressive startups can be when engaging in such “general solicitation,” which is barred under the SEC’s “Regulation D” rules but allowed under the JOBS Act signed into law in April. The proposals would then be subject to a public comment period expected to last one to three months.