CFWS Interview Highlights 3
Here are some highlights from more of our interviews from CrowdfundingWorldSummit.
Daniel Gorfine: New Capital Access Tools for Individuals in Business
- Title II deals in private capital markets and accredited investors
- Title III legalizes crowd funding
- Under Title II, 506© requires a more formal accrediting process, beyond the previous self-accredited network of investors.
- Angel List is an accredited-only investment platform for entrepreneurs and investors.
- Using Title II and Title III to refuel investments in the earlier stages of innovative development.
- Title II is a relaxation to appeal to those who are accredited (not crowd funding.) Title III is crowd funding.
“The Milkin Institute is an independent, nonprofit, non-partisan think tank.” They aim to expand and regulate the financial market while providing financial tools to solve global issues.
A few of the key tools being discussed right now are Title II and Title III legislation, which are part of the Jobs Act. Title II deals with private capital markets whereas Title III legalizes crowd funding. Both of these are meant to stimulate investment in small businesses and entrepreneurial pursuits at earlier, notably riskier, stages of development.
Title II deals with capital markets and accredited investors, notably lifting the previous ban on “general solicitations on private offerings sold to investors.” This allows “companies, issuers, and funds to mass market private offerings to the general public as long as the investors are accredited.
Title III is “public securities crowd funding” which looks at “how the accreditor/investor marketplace develops.” Unlike Title II where you can mass market to the general public, title III requires an intermediary. Title II allows issuers to appeal directly to a broader audience, but only about 2% of the population can participate. Title III allows 98% of the population to get involved in investments, however an intermediary regulating system moderates the transaction between issuer and investor.
The Milkin Institute aims to educate investors and to help people better understand the value and risk involved in investment decisions. Explaining the new tools for individuals in business is the first step.
John Harthorne Interview: More Optimism, More Growth and More Jobs
- Mass Challenge works to “restore creativity through business by bringing out the worlds most innovative ideas and provide them with the resources needed to find success”
- Investing in start-ups is an investment into the community.
- The intent is to create something of value and to capture value.
- Value and solutions will create profit.
John Harthorne is one of the creators of the Mass Challenge, the largest start-up accelerator with no strings attached. Camaraderie and access to an encouraging, mentoring pool, and funding will be provided to help foster selected start-ups to fruition.
Boston, home of Mass Challenge, has become a hub for many startups, from Microsoft to Facebook. Why Boston? With dozens of colleges in Boston, and over a hundred in Massachusetts, there is a “concentration of knowledge and technical talent”. In addition, the state and corporate companies have become invested in this aspect of the community, providing grant money to businesses with innovative ideas. Mass Challenge was funded by a state grant, as were many of the start-up academic competitions Harthorne participated in years before.
This climate is being recreated on a micro level through Mass Challenge. Bringing innovators together, into a collaborative environment, ideas are constantly shared and challenged. Selected start-ups are provided with office space and materials to test their ideas while being provided with mentors to help guide them to success. Investment is required for innovation, and through Mass Challenge, Harthorne hopes to create “more optimism, more growth, and more jobs.”
The promotion of start-ups is not just a business investment, but also a communal one. As Mass Challenge is looking to expand this community, allowing start-ups to drive innovation on a national, if not international, level.
Arik Marmorstein: the Incubator & the Ambassador
- Many countries overseas are waiting to pass crowd-funding legislation until after the US creates a precedent.
- There is a desire for crowd funding on an international scale.
- Israel’s reward-based crowd funding platform is creating innovative solutions for crowd funding development.
- The use of an Incubator program and Ambassador may be the key to successful crowd-funded production.
Memuna, an Israeli reward-based crowd funding platform, is finding great success as it expands its reach overseas, discovering new methods of startup promotion without upfront costs. While Israel, and many other countries, are waiting to pass crowd-funding legislation until after the US sets a precedent, innovative ideas are already underway.
There are two key components to Memuna’s reward crowd funding process:
- The Incubator Program
- The Ambassador
An Incubator program allows for international startups to apply for a three-month period of production in the US. This time is pivotal for making connections and connecting with potential clients. Currently, Israel’s focus lies in the fashion industry. Through crowd funding, designers are able to test their products before the production stage. The incubator program expands this trial to an international clientel.
Another key aspect of this reward crowd-funding platform is its use of ambassadors. Ambassadors are meant to introduce pre-purchasers to a crowd-funded product in its development stages. The crucial element to this process is that ambassadors are paid by commission, with their reward is determined by the number of products sold (through discounts, free merchandise, etc.) This allows for the promotion of a product without upfront costs, ensuring its relevance before a serious investment is made.
Both of these tactics may serve useful to rewards based crowd funding opportunities across the globe, and as they save the fashion industry time and money, innovation is underway.
Bruce Lipnick: The Future of Crowd Funding Platforms
- By having joint ventures in other countries, Crowd Fund Alliance Co. has the potential to be an international platform, funding relevant startups faster as an international investment.
- Crowd funding can be seen as the socialization of private equity to get money to small companies.
- The majority of new jobs are created by small companies.
- Crowd funding platforms have the opportunities to nurture startups to fruition.
Crowd Funding Alliance Co. is looking at both the crowd funded and crowd funder in their international startup initiative. Creator Bruce Lipnick knows that the majority of new jobs are created by small companies, and with the right funding and guidance, but investor and innovator can profit. With plans of a mentorship program to help guide start ups past their first crowd funding initiative and into continued equity, businesses can make smart decisions at the beginning.
The failure rate of early stage companies is high, and poor experiences of novice investors may negatively effect crowd funding as a whole. It is important to remember that any investment is a risk, and even the most experienced investors lose on occasion. One way to keep investors safe however is by providing an intermediary platform such as Crowd Funding Alliance Co.
Crowd Funding Alliance Co. looks to help both startups and investors prepare for the long-term effects of an early investment. By connecting startups with investors, potentially from all over the world, Crowd Funding Alliance can help foster a symbiotic relationship that gives both parties options for long-term rewards. A few key strategies will help businesses and investors make the most of their relationship: buybacks, private share sales, and top line royalty interest on revenue.
For crowd funding to succeed, and startups to become established sources of revenue, investments must be considered as an element of a greater lifecycle. Crowd Funding platforms are instrumental in this process.