Crowdfunding

Reach Center – San Leandro

March 30, 2018

Alameda County SBDC

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Equity Funding

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Our Client Results

ALAMEDA COUNTY: 2013 through 2017 (5 Years)

Presentation Download

www.acsbdc.org/handouts

Lee Lambert

Director, Alameda County SBDC since 2014 –

affiliated as advisor since 2008

Founder/CEO, Simple Buyout Plans and

Hollywood Partners

Founder, Cambridge/Samsung Partners

(venture fund)

Samsung Electronics, Van Kasper & Co.,

Deloitte, Ernst & Young

Harvard Business School, UC Berkeley

Crowdfunding

Crowdfunding is forecasted to pass venture capital as a

source of business funding in the near future

2014: $16.2 billion worldwide

2015: $34.4 billion worldwide

2020 forecast: $90.0 billion (World Bank)

2015 Venture capital: $124 billion

2015 Crowdfunding - $34.4 billion, up from $16.2 billion

Crowdfunding Segments

Source: Massolution

Platforms

Crowdfunding Players

Rewards BasedDonation gets you a promised

product

DonationGiving for nothing in return

EquityOwning a part of the project

LendingMoney returned, with interest

Kickstarter GoFundMe Wefunder LendingClub

Indiegogo CrowdRise StartEngine Prosper

PledgeMusic YouCaring Seedinvest Kiva

RocketHub Causes Equitynet FundingCircle

Barnraiser GiveForward Rockethub SoFi

Crowdtilt Fundrazer Angel List SoMoLend

Source: Crowdfundingpr, social media & marketing campaigns

Crowdfunding Purposes

Large and Successful Fundings

What is Crowdfunding?

3 Basic Models

Reward/Donation

Lending

Equity

History of Global Crowdfunding

Recent History

2003: Artistshare – website for artists to raise funds to

make recordings

Example: Maria Schnieder (Jazz) raised $130,000

Premiums: $9.95 – first right to download

$250 – name listed on notes

$10,000 – listed as Executive Producer

Won a grammy in 2005!

Rewards Based Sites

Rewards Based Sites take Off!

2008: Indiegogo

2009: Kickstarter

Rewards Based sites – encompassed arts, social causes, entrepreneurs and small

businesses

Kickstarter

Through March 28, 2018

396,000 campaigns “All or Nothing” launched

141,174 successful projects (36%)

$3.6 Billion from 14.4 million backers

31.8% over $10,000

3.3% over $100,000

Famous Kickstarter Campaigns

https://www.kickstarter.com/projects/ryangrepper/coolest-

cooler-21st-century-cooler-thats-actually

https://www.kickstarter.com/projects/getpebble/pebble-e-

paper-watch-for-iphone-and-android

https://www.kickstarter.com/projects/elanlee/exploding-

kittens?ref=most_funded

Indiegogo

Through August 20, 2017

275,000 campaigns launched

$1 Billion raised from 11 million backers

Lower average funding raised than others

47% of campaigns are run by women

Lower success rate than Kickstarter

Indiegogo Notable Campaigns

https://www.indiegogo.com/projects/flow-hive-honey-on-

tap-directly-from-your-beehive-environment--5#/

https://www.indiegogo.com/projects/ubuntu-edge#/

https://www.indiegogo.com/projects/super-troopers-2#/

Most Popular Reward Platforms

Kickstarter

Need US Bank

Account

Must reach your

goal

5% fee

3% bank fees

Must be approved

to start

Indiegogo

Accepts Paypal

Do not have to

reach goal

5% fee to goal

3% bank fees

3%-5% Paypal Fee

No approval

process

Donation Based Crowdfunding

2010: GoFundMe platform launches

Charitable giving

Medical bills, Disaster Relief, Little League Teams

Over $3 billion raised

About 8% fee all-in

https://www.gofundme.com/success

Charitable fundraising often done on Kickstarter and

Indiegogo, + many other sites

• Born out of Financial Crisis

of 2008

• Dissatisfaction in consumer

& small business lending

market

• Global P2P market expected

to be $900 Billion by 2024,

up from $26 Billion in 2015.

• Lending Club, Prosper and

Upstart are the top players.

• Can be expensive

• Kiva-0% Loans from your

network & extended parties

Peer to Peer Lending

Source: Transparency Market

Research

Peer to Peer Costs

Lending Club Rates

Equity Crowdfunding

Emerged in 2011 with “Regulation D” Platforms

Microventures – Tech companies

CircleUp – Branded consumer products and retail

Reg D allows only “accredited” investors

Generally, $1 million net worth other than home

Or, income of $200,000 last 2 years ($300,000 if

married) and expectation to continue at same level

JOBS Act of 2012

Allowed advertising for many types of crowdfunding offers

Opened up market to solicit “non-accredited” when regulations

published by the SEC in May, 2016.

Intended to help small companies raise up to $1 million per year

Many requirements before offering securities and ongoing reporting

requirements.

- Up front attorney/accountant fees to make an offering

- Ongoing financial reports

Equity Crowdfunding Options

Equity Crowdfunding Sites

Crowdfunding vs. Venture Capital

Potential Advantages:

Easier to access

Valuation may be higher

Investment terms may be better

Publicity

Broader stakeholder base

Note: VC’s don’t like to be “side by side” with

unsophisticated investors – some won’t consider investing

after a crowdfunded equity offering.

Regulation CF - 2016

Intended to help small companies raise up to $1 million

per year

Many requirements before offering securities and

ongoing reporting requirements.

- Up front attorney/accountant fees to make an offering

- Ongoing financial reports

Reg CF - JOBS Act

Reg CF Deals through 2017

Source: Wefunder

Reg CF Deals to September 2017

Source: StartEngine

Top 10 CF Raises in 2017

Another Way to Use Reg CF

Use Reg CF to obtain a loan

Example: Red Bay Coffee (Oakland)

Raised $160,000 on Wefunder

Terms: Repay with 5% of net revenues until investor is

returned 150% of investment (early investors received

200%). Forecast return in 3-5 years

https://wefunder.com/red.bay.coffee

Strategy

Tell Your Story

1. Have a character (can be family, neighborhood, etc.)

2. Share a problem/opportunity that character encounters

3. Make your donor a “guide” in your story

4. Give them a plan

5. Call them to action

6. Study unsuccessful campaigns to know what “not to

do”

Examples

https://www.indiegogo.com/projects/books-on-b-new-hayward-bookstore-independent-

community--2#/

https://www.kickstarter.com/projects/480091182/temescal-brewing-a-new-oakland-

brewery-and-beer-ga

https://www.indiegogo.com/projects/mr-dewies-cashew-milk-ice-cream#/

https://www.kickstarter.com/projects/1648197953/sequoia-diner

https://www.kickstarter.com/projects/1764790454/core-kitchen-the-worlds-most-

nourishing-restaurant

https://www.indiegogo.com/projects/the-core-wireless-speaker-system#/

https://www.indiegogo.com/projects/who-gives-a-crap-toilet-paper-that-builds-toilets#/

Steps to Launch

Build Your Team

Team Leader

Social Media Killer

Networker Extraordinaire

Funder Liaison

Content Developer

PR Maven

Name Your Idea

Set Your Funding Goal

Set Campaign Length

Starting Your Campaign

Create Your Media Database

Set Rewards

Digital > Tangible

Set reward tiers & themes

$25 & $100 most popular tiers

What can you give away that is meaningful?

Doesn’t need to be expensive

Build Your Fan Base

Create Your Story

Create Facebook/Twitter Accounts

Create Newsletter signup

What can you give away that is meaningful?

Build a Campaign Calendar

The Kickoff Personal email to

friends/family

Have them donate

right away

After 15-20% in

then blast to crowd

Spread the Word

Update your email signature

Send out a newsletter

Facebook/Twitter

Tap existing networks

Mainstream media

What to Share

Quotes from funders

Behind the scenes

pics/videos

Endorsements

Specific perks/rewards

Media coverage received

Facebook

Facebook once a day

Ask questions

Ask for shares/likes

Include photo

Always include a call to action

Twitter

Tweet all the time

Ask for retweets (RTs)

Thank RTs

Use popular #hashtags

Seek influencers

Always include call to action

Platform Updates

1-2 times per week

Be personal

Include them in the story

Ask for continual help

Extras

Add perks half way through campaign

Find more partners to cross-promote

Continue reaching out to

blogs/mags/newspapers

Release more short videos

Homestretch

Final week create a sense of urgency

Campaigns that reach 50% of their goal are 95% likely to

succeed

On Indiegogo, over 90% of successful campaigns have

repeat contributors

Lastly

Collect the Money

Fulfill the Rewards

Don’t Forget Your

Funders

Key Statistics

Per Indiegogo statistical study:

30-39 Day campaigns work best

Keep updating the campaign page – makes a difference

Start strong, finish strong – 42% of funds 1st and last 3 days

Add new perks after launch – successful campaigns add 12 more

after launch

Work with a team – team approach raises 3x more

Include a pitch video – raises 4x more

https://go.indiegogo.com/blog/2015/10/crowdfunding-statistics-trends-infographic.html

Thank You!

Questions?