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The Global Investment Crowdfunding IndustryData, Insight & Trends

Jonathan Sandlund

Jonathan Sandlund | @jsandlund

@jsandlund

Wednesday, August 28, 13

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thecrowdcafe.com research, data and analysis on the global crowdinvesting industry

localinvestors.org live, think, invest local

about me

Jonathan Sandlundj@thecrowdcafe.com@jsandlund

Wednesday, August 28, 13

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Thank you!

Leading law firm serving the security crowdfunding industry: Portals; Crowdpreneurs; The Crowd.

thecrowdcafe.com/NYESNDownload

Wednesday, August 28, 13

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Intro to Investment CrowdfundingThe Mechanism

Jonathan Sandlund | @jsandlund

Wednesday, August 28, 13

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Funded$

$

$$

$

the mechanism

FAMILY FRIENDSCUSTOMERS

INVESTORSAFFINITIES X =

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Funded$$

$$

$

the mechanism

FAMILY FRIENDSCUSTOMERS

INVESTORSAFFINITIES X =

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Funded$$

$ $

$

the mechanism

FAMILY FRIENDSCUSTOMERS

INVESTORSAFFINITIES X =

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Funded$ $

$ $

$

the mechanism

FAMILY FRIENDSCUSTOMERS

INVESTORSAFFINITIES X =

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Funded$

$

$

$

$

the mechanism

FAMILY FRIENDSCUSTOMERS

INVESTORSAFFINITIES X =

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Not Funded

$

$

$ $

$

the mechanism

FAMILY FRIENDSCUSTOMERS

INVESTORSAFFINITIES X =

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reward vs. investment-based

~ $5,000

~$160,000

Median Fundraise

~$775,000

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12Jonathan Sandlund | @jsandlund

The Legalities of CrowdfundingTitle II & Title III of the JOBS Act

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The JOBS Act

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Title II Title III

‣ Lifts ban on general solicitation and advertising on security offerings to accredited investors

‣ Provided issuer takes reasonable steps to verify accreditation

‣ Must file amended Form D

‣ Businesses Raise up to $1mm in 12-month period

‣ Investors tiered limits on investment amount

‣ Rule-making includes SEC and FINRA

Crowdfunding for Accredited Investors

Crowdfunding for Everyone

Wednesday, August 28, 13

Accredited Crowdfunding IMPACT

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‣ Brings dramatic efficiencies to our private capital markets • Efficiencies = (Internet) * (Private Sector Innovation)

‣ Geographically, socially indiscriminate

‣ Stands to motivate accredited capital off the sidelines and into private markets in an enormous way

Jonathan Sandlund | @jsandlund

Wednesday, August 28, 13

Democratized Crowdfunding IMPACT

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‣ Businesses • Conversion of Social to Financial Capital • New Era of Marketing

‣ Investors • Financial Empowerment• Trust • Meaningful Investment

‣ Society • Equal Opportunity

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The U.S. Market

Jonathan Sandlund | @jsandlund

Wednesday, August 28, 13

platforms: market segmentation

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Investment Crowdfunding Platforms

Niche/Affinity"Local" (SMBs)Startups

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Global CrowdfundingWhat can we learn?

Jonathan Sandlund | @jsandlund

Wednesday, August 28, 13

19Wednesday, August 28, 13

Macro-Data: Selected Sample

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Equity180 Deals

$132 Million

Equity59 Deals

~$16 Million

Debt2,573 Deals$227 Million

Equity28 Deals

$2.6 Million

Equity11 Deals$954k

Equity16 Deals

$15 Million* Selected sample of platforms

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304 Equity

Placements

2,573 Loans

$300+ Million in Crowdfunding Transactions...

Wednesday, August 28, 13

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Crowdfunding ModelsInnovation, Diversity

Jonathan Sandlund | @jsandlund

Wednesday, August 28, 13

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‣ A+ to C Risk Bands Applied

‣ Offer 1, 3, 5 year loans

‣ £5,000 - £1,000,000

‣ Secondary market

‣ Crowdfunded two $80,000 small business loans in under 29 minutes

Debt2,573 Deals$227 Million

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Discovery

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Splash Bathroom Accessories Limited

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Credit Score History

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Key Financials

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Questions & Answers

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$0!

$2,000,000!

$4,000,000!

$6,000,000!

$8,000,000!

$10,000,000!

$12,000,000!

$14,000,000!Monthly Loan Originations Since Inception!

August 2010 June 2013Wednesday, August 28, 13

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‣ Launched 2010

‣ Sector Focus General (concentration: internet, food & drink)

‣ Lowest Raise $19,000 Highest Raise $2.3 million

‣ Averages (median, n= 48)

‣ Raise $124,800

‣ Equity Offered 16%

‣ Post-Money Valuation $805,000

‣ Number of Investors 52

‣ Investment Size $2,712 (low: $331; high: $16k)

Equity59 Deals

~$16 Million

Jonathan Sandlund | @jsandlund

Wednesday, August 28, 13

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‣ Launched July 2012

‣ Sector Focus Internet

‣ Lowest Raise $15,200 Highest Raise 240,000

‣ Averages (median, n=24)

‣ Raise $64,000

‣ Equity Offered 10%

‣ Post-Money Valuation $520,000

‣ Number of Investors 75

‣ Investment Size $1,070

Equity28 Deals

$2.5 Million

Jonathan Sandlund | @jsandlund

Minimum Investment $16

Wednesday, August 28, 13

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‣ Launched Mid-2012

‣ Sector Focus Consumer Products/Retail

‣ Lowest Raise $440,000 Highest Raise $2.4 Million

‣ Averages (median, n=16)

‣ Raise

‣ Number of Investors 15

‣ Investment Size $59,333

Equity16 Deals

$15 Million

Jonathan Sandlund | @jsandlund

Wednesday, August 28, 13

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‣ Domain Expertise Founding team has deep experience investing in consumer product and retail industries

‣ Curated Deal-Flow To date, less than 2% of applications accepted onto the platform

‣ 3 Weeks Time it took Melt to raise $1,000,000

Jonathan Sandlund | @jsandlund

Equity16 Deals

$15 Million

Wednesday, August 28, 13

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The Disruption

Jonathan Sandlund | @jsandlund

Wednesday, August 28, 13

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Crowdfunding

TechnicalDisruptionEntrance of the internet into the private capital formation process.

Cultural Disruption

A desire to connect more meaningfully with the things

we buy, the things we do, and the things we invest in.

Two mega-trends colliding. Driving a paradigm shift in early stage capital markets

Investment Crowdfunding

Wednesday, August 28, 13

Summed up...

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The first major change in security law in 70+ years. Allows the internet to enter the

fundraising process.

Processes moved online, efficiencies realized, and incumbents with traditional cost

structures obsoleted

What it means...

Technical

Wednesday, August 28, 13

This is what it looks like...

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Technical

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Nearly all categories disrupted by the internet...

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Except fundraising.

Technical

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A fundamentally more efficient capital formation process

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Technical

A Big Bank...

Source: http://www-core.nesta.org.uk/library/images/NestaBanks.jpg

Wednesday, August 28, 13

But it’s not just structural change driving the disruption

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Cultural

It’s cultural.

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Chicago Booth: Only 13% of Americans trust the stock market

Distrust is pervasive

Chicago Booth Financial Trust Index

Cultural

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Today little alternative to public markets

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Tomorrow individuals empowered to invest in the the companies, causes and people they believe in

Cultural

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A cultural shift

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‣ Web 1.0 The Information Web

‣ Web 2.0 The Connected Web

‣ Web 3.0 The Meaningful Web

Cultural

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Jonathan Sandlundj@thecrowdcafe.com@jsandlund

Thank You!thecrowdcafe.com/NYESNDownload

Wednesday, August 28, 13