Equity crowdfunding

Discussion in 'Investing' started by blypelako, May 6, 2016.

  1. blypelako

    blypelako Active Member

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    So, lately I've been getting more into this type of investment. I can't by any means say it will become my primary thing, rather a hooby. And, apparently there're some big changes coming in the near future.

    The Jumpstart Our Business Startups Act or JOBS Act, is coming into its full strength later this month and is to mark a new era for small enterprises. This is a law intended to encourage funding of United States small businesses by easing various securities regulations. The term "The JOBS Act" is also sometimes used informally to refer to just Titles II and III of the legislation which are the two most important pieces to much of the equity crowdfunding and startup community. Title II went into effect on September 23, 2013. On October 30, 2015, the SEC adopted final rules allowing Title III equity crowdfunding. The final rules and forms are effective May 16, 2016.

    Many investors and entrepreneurs around the US are waiting for this moment and I thought it’d be useful to sum up the results of the document. On May 16th the equity crowdfunding provisions of Title II are taking their effect. It implies that Americans who are not accredited as investors will now be able to invest in private companies.

    Mind that, companies willing to fall under Title III fundraising are subject to regulatory requirements much more severe than present ones. Raising money under it requires GAAP accounting, reviewing by public accounting firms, sometimes auditing by those as well as some additional disclosures, compliance, and filings. Furthermore, it’s not a one-time thing but an annual routine. On top of that companies are to accept many ‘penny investors’ on their cap table who will also have statutory rights. And, to top this off, once the company has 500 unaccredited investers and/or $25 million I assets, it will be made to go public.

    Many startup investors will try to stay away from Title III companies because they will carry restrictions which may have negative outcomes in the future (i.e. losses caused by going public at a wrong time, having hundreds of investors who have little to no experience in handling company management etc). It is now quite clear that those who will become victims of these new regulations are not going to be top venture capitalists but regular Americans not too keen on investing, who will be losing their hard-earned cash money.

    At the end of the day, we can say that a noble initiative didn’t come out quite as expected.
     
  2. StockJock-e

    StockJock-e Brew Master
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    Interesting, tell me more.

    What exactly is it you invest in?
     
  3. blypelako

    blypelako Active Member

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    At the moment nothing, talking about equity crowdfunding precisely. Still looking a bit more into it, you know. I do, however, visit kickstarter from time to time and back some projects here and there, which is not exactly the same thing.
     
  4. StockJock-e

    StockJock-e Brew Master
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    What we need to do is a kickstarter concept that your support translates into direct share ownership!
     
  5. T0rm3nted

    T0rm3nted Moderator
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    I saw something like that on Mad Money like a month ago, but I don't remember the details or what the company was called.
     
  6. blypelako

    blypelako Active Member

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    This is more or less what EC is about, isn't it? You invest into some company and then you get financial returns (or not, depending on how well the company develops).
     
  7. blypelako

    blypelako Active Member

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    The Blow LTD

    Have you ever wanted to be manicured at yours? Well, even if you didn’t it might become possible sooner or later. A UK based start-up that offers on-demand beauty services is looking to raise some £1 million ($1.4 million) via crowdfunding. The Blow LTD (what a fantastic name) app will allow its users to book treatments via their smartphone. On-demand services are becoming more and more popular nowadays ranging from taxis to cleaning and beyond, and this might become its latest reincarnation.

    The money is being raised on Seedrs, an equity crowdfunding platform that lets people own shares in companies they back on the platform. The company is looking to raise about $750, 000 Dharmash Mistry, an ex-venture capitalist and co-founder of Blow LTD said, but it's likely the round will be over-subscribed to over $1 million.

    The main reason for using crowdfunding, according to Mr Mistry is to create dedicated customership and excessive funds will be transferred into expanding beyond London (and the UK in the future). As well as on-demand services Blow LTD has physical salons and stores where they train their freelancers.

    The project has raised more than $600,000 as of now.

    Does human indolence have any boundaries?
     
  8. Zaysev

    Zaysev Member

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    Well, it IS convenient, I guess... Besides, more and more technologies make save us the need to go outside - it's logical that with it more and more services will be transfering themselves to customer's places.
     
  9. blypelako

    blypelako Active Member

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    I found what you just said sadder that I should have haha. Yeah, soon we will stop leaving our places at all..
     
  10. InvestingNewbie

    InvestingNewbie New Member

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    Sorry, I have a total newbie question. I am looking into crowdfunding investment opportunities. I guess I like the idea of giving a new company a chance, especially if it is something I believe in and can see it going somewhere. It feels like a better use of my money then....say....investing in Apple stock. Although Apple stock is most likely the lowest-risk investment, considering they are the world's most valuable brand.

    I guess my question is how to go about it? What are some fundamentals that I should know, and realistic risk and reward ratios? Is kickstarter the best place to start, or are there other options out there? What about companies marketing their crowdsourcing campaign on social media, like marketing through twitter, instagram, facebook, etc. - which can be very effective, but what are the industry standards? - and their company website? How do crowdsourcing campaings get controlled? Sorry, I probably should just go and read up on this stuff on my own, but I figured you might have some advice. Or in the very least, can direct me toward the most helpful information that I should be reading. Maybe some online lectures that I can hear as well.

    Thanks for any helpful advice.
     
  11. Gambit

    Gambit Active Member

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    What is a Convertible Note? Entrepreneurs have two options when it comes to raising money to fund their company, debt or equity. Debt is a loan which they must pay back within an agreed upon amount of time, with interest. Equity means they are instead providing a portion of ownership of their company in exchange for the investment. A convertible note (referred to as a “note” in the Venture Capital world) is a hybrid funding solution. Notes are loans which convert to equity at an agreed upon milestone or maturity date—usually a Series A round led by a VC Firm. One important concept to understand about Convertible Notes is that they do not set a valuation on what the company is worth. This is one of the key distinctions between Convertible Notes and Equity Ownership. An equity owner will say “your company is worth $10M and I own 20% of that company—i.e. $2M worth.” A convertible note will instead be a $100K loan, which converts to equity when a VC comes in and sets this valuation in the next funding round or another agreed upon milestone is meet.
     
  12. Gambit

    Gambit Active Member

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  13. Gambit

    Gambit Active Member

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  14. blypelako

    blypelako Active Member

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    Apparently Indiegogo went into equity crowdfunding. Anyone excited about that?
     
  15. Gambit

    Gambit Active Member

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    No you did not understand! I mean that crowdfunding is raised to a new level this year! And now it's not just charity or for a modest investment thanks! This is a real opportunity to earn money! I will inform the course of the new information!
     
  16. Gambit

    Gambit Active Member

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  17. Gambit

    Gambit Active Member

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  18. Gambit

    Gambit Active Member

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    watch it!
     
  19. aaa

    aaa Member

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  20. Jonathan Wiley

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    The preliminary analysis of Title III platforms suggests that these platforms can be a good fit for ventures that have relatively modest (under $300,000) funding requirements. WeFunder has emerged as the leading platform in Title III equity crowdfunding having hosted over 40 fundraising campaigns in the first 9 months since Title III legislation took effect.

    Thus there are at least two clear takeaways for entrepreneurs. First, equity crowdfunding may be a good venue for securing asset-backed loans from accredited investors. Second, equity crowdfunding platforms may be a good source of supplementary capital for ventures that have successfully raised funding from traditional VCs.
     

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