Tag Archives: Investor

Startups Finance – How to Present Financials at a Pitch Event

By Antonio A Arias

past present futureAt angel investor forums, it is quite common for entrepreneurs to make the mistake of over selling its projections with little discussion of its past and present financial status. Therefore, the story does not flow and only begs questions distracting us from the value proposition.

Remember: financial investors (unlike strategic investors) are interested mainly on how they will get a return on their capital and when. For a short ten minute pitch, hit the bullet points fast.

Past

How much was invested by the founders and other shareholders? Where did the money go? What were the results or milestones?

Present

What is the status of the business? Sales funnel? Sales traction?

Future

How much funds are needed to move forward? Use of proceeds? Expected results?

The key is to earn the investors’ confidence fast. There is no sense talking about the projections without a quick recount of the past performance and present realities. Unless the business has proven its marketing strategy, reporting on the customer development status is the more meaningful information. Defending a 3 to 5 year financial forecast and valuation is a total waste of time.

Establish instant credibility. Always show a financial forecast starting with the past and the present.

http://www.healthycrowdfunder.com

 

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Equity Crowdfunding Wakes Up Goliath

TMX-PM-logo-b-EN-300x126

crowdfunding-secondary-marketLast year on June 19, 2013, we hosted our first crowdfunding meetup called  “Crowdfunding Reinvents the Old Stock Exchange” and late adopters ignored the equity crowdfunding word. Not this past week.

You know crowdfunding is going mainstream when the:

  1.  TMX Group, Canada’s most senior stock exchange recognizes crowdfunding as competition in its latest Management Discussion and Analysis (MD&A) for fiscal year 2013.
  2.  TMX Group  has announced they are operating a private marketplace following  NASDAQ OMX announcement on March 6th.
  3.  US SEC and FINRA are finally processing the public comments for the JOBS Act Title III which will effectively legalize crowd investing by non-accredited investors to virtually all kinds of private businesses through the internet.
  4.  Ontario Securities Commission  and other provincial securities regulator  joined the stampede this past week inviting the public to comment on their proposed crowdfunding rules until June 18, 2014.
  5.  Venture capitalists have injected more capital into equity funding platforms CircleUp $14 million   and Realty Mogul $9 million.

 

Furthermore, the US JOBS Act will facilitate a pipeline of companies remaining private until mature enough to go public

 

  1. Title II (after 80 years) finally allows businesses to solicit or advertise fund raising to accredited investors using various social media and traditional marketing channels.
  2.  Title IV Regulation A+ will allow companies raise up to $50 million “ lite IPO” or mini registration  and Title V will increase shareholder count from 500 to 2,000 before becoming a reporting issuer. See earlier blog Crowdfunding Is Better Than You Think

 

So what do all these news mean to you?

If you are an Investor

 Accredited or non-accredited, angels, other high net worth (HNW), or institutional investor, start looking for funding platforms that:

  • conducts a comprehensive due diligence and vetting of businesses using its platform
  • places a high priority on investor protection at optimal costs
  • recruits proven management with appropriate skill sets to partner with issuers
  • facilitates liquidity paths for investors prior to the bigger exit
  • experienced in best practices in corporate governance and investor relations with publicly listed companies
  • managed by people aligned with investors’ interest through co-investment

If you are a startup or early revenue stage business

While making your company investor ready, start looking for funding platforms that:

  • places a high priority on educating the non-accredited investors on the various risks associated with a particular business before investing
  • works with your management like partners from funding to exit
  • encourages global syndication or collaboration with other platforms so you succeed in raising capital faster
  • prepares your company to graduate to more senior capital exchanges

At Healthy Crowdfunder we are committed to the highest standards and best practices applied in the public capital markets at optimal costs.

 

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Healthy Crowdfunder Collaborates with British Columbia Investment Capital Branch

bc

To Offer 30% Tax Credit to New BC Investors 

Vancouver, British Columbia – Healthy Crowdfunder Corp (“HCC”) is pleased to announce that the Company has been registered (Registration No. 30965) as an Eligible Business Corporation (EBC) under section 28.2 of The Province of British Columbia’s Small Business Venture Capital Act.

The Equity Authorization will allow HCC to raise equity capital directly from eligible Investors   who are BC residents or taxable corporations. Individuals who purchase shares of HCC are eligible to receive a refundable tax credit equal to 30% of their investment amount, up to a maximum of $60,000 in credits per taxation year. Corporations may only deduct the tax credits from their BC taxes otherwise payable under the BC Income Tax Act. There is no annual limit on the tax credit for corporations; however, the credits are non-refundable.

The 30% tax credits are offered on a first come – first serve basis, as part of a limited government allocation and it is expected that they will be fully allocated by the end of October 2013. Investments in Healthy Crowdfunder are also fully RRSP eligible.  A BC resident investing $10,000 and transferring the securities to his RRSP at the top marginal rate is saving $7,370 for a net investment of $2,630.

InvestmentRRSP deduction at 43.7% marginal rate

Tax refund at 30%

$10,000

(4,370)

(3,000)

Total tax savingsNet investment at risk

7,370

$2,630

CEO Antonio Arias noted: “The BC Venture Capital Act is a progressive program allowing us to develop and offer our crowdfunding and crowdsourcing services to the huge healthcare ventures in the US and Canada. The completion of the platform will facilitate the introduction of members – health ventures, investors, service providers, and customers – resulting in more efficient flow of capital and other resources. Technology is advancing at exponential rate. The traditional ways of doing business are being replaced by more intelligent and economic systems delivering faster results. Various sectors in healthcare market can benefit the most as the world’s ageing population continues to rise.”

We are very grateful to Rachelle Kallechy, Portfolio Manager and Jeff Lindsay, Executive Director of the BC Investment Capital Branch for all their efforts to qualify us for this special program of the Ministry of International Trade. When authorized for $1 Million, it is akin to the BC government investing $300,000 towards technology business and job creations. One of our plans is to develop an accelerator in Vancouver similar to RockHealth (San Francisco) and StartUp Health (New York).

Watch Premier Christy Clark as she inspires us to dream about our country.

About Healthy Crowdfunder Corp

www.healthycrowdfunder.com

Healthy Crowdfunder Corp is a privately held technology company which is being launched to develop a platform linking members such as health ventures, investors, service providers, and customers to advance the development and commercialization of preventive, predictive and personalized (“3Ps”) health solutions. With the advent of crowdsourcing and crowdfunding arising from technological advancements, HCC will address the 3Ps of the $3 trillion healthcare market by creating an ecosystem where the members can collaborate and operate expeditiously to the benefit of all health consumers.

Watch Premier Christy Clark as she inspires us to dream about our country  http://www.youtube.com/watch?v=VX4HgLUyJaY

About The Small Business Venture Capital Act

http://www.jtst.gov.bc.ca/ICP/VCP/index.htm

To claim BC Venture Capital Tax Credit

Venture capital programs encourage investors to make equity capital investments in British Columbia small businesses that will enhance and diversify the provincial economy.  The government recognizes that creating new small businesses and expanding existing ones will contribute to a healthy economy.  These programs give small business continuous access to early-stage venture capital to help them develop and expand.

 

Contact Information:

Healthy Crowdfunder Corp

Antonio A Arias

Chief Executive Officer

T: 1+ 650-319-7418  | 1+ 778-889-8509

E: tarias@alamidascapital.com

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Crowdfunding Is Better Than You Think

President Obama signs JOBS ActExtracted from Forbes, October 8, 2013

The JOBS Act Isn’t All ‘Crowdfunding’

By Chris Brummer & Daniel Gorfine

On September 23, the SEC officially implemented Title II of the JOBS Act by lifting a decades-old ban on the mass marketing of private securities offerings – meaning those securities not formally registered with the SEC.  This has triggered enormous excitement in startup and small business communities as entrepreneurs consider ways to raise funds through newly available capital-raising tools.  But even with the increased media coverage and interest, there is still a good deal of confusion about what portion of the law went ‘live,’ and how this portion relates to other provisions in the legislation.

Much of the confusion can be tied to the habit of conflating different aspects of the JOBS Act and calling it all “crowdfunding.”  The fact is that the JOBS Act tackles access to capital in a number of distinct ways, each with its own set of opportunities, risks, and questions.  And while the law includes aspects related to use of the Internet and social media – elements that most people associate with crowdfunding – large sections are also focused on creating new opportunities for wealthier investors and private capital markets.  Understanding these distinctions is critical for entrepreneurs and investors alike.  To help, here’s a quick primer on the more prominent features of the JOBS Act.

  • Crowdfunding.  Let’s start with the term ‘crowdfunding.’  Crowdfunding refers to the process by which capital is raised for a project, venture, or enterprise through the pooling of numerous and relatively small financial contributions or investments from the public, usually via the internet.  Donation-based or ‘non-financial-return’ crowdfunding is already in existence and has been made popular by platforms such as Indiegogo and Kickstarter.  While the success of this non-investment model certainly inspired some of the thinking driving the JOBS Act, it is important to note that this kind of crowdfunding is not directly impacted by the law. For the sake of clarity, let’s call donation-based or non-financial-return models: crowdfunding.
  • Title I of the JOBS Act: the IPO On-Ramp for ‘Emerging Growth Companies.’  The first part of the JOBS Act deals with companies looking to go public through an initial public offering (IPO).  In response to a trend of declining IPOs over the past few decades, Congress created special rules for so-called “emerging growth companies” (EGC) – defined as a company with less than $1 billion in revenues over the past fiscal year – whereby the company would be exempt, or at least partially exempt, for a period of time from certain disclosures that were thought to deter companies from choosing to go public.  An EGC is also permitted to file a confidential IPO registration statement with the SEC that must be made public at least 21 days before it begins actively promoting the sale of its offering, and can ‘test the waters’ with certain qualified buyers to gauge interest in the offering.  This is all intended to jumpstart a laggard IPO market, especially for small companies.  This provision went ‘live’ with the legislation, and is what Twitter is relying on for its planned IPO.  This portion of the law can be referred to as: the IPO On-Ramp.
  • Title II of the JOBS Act: General Solicitation and Accredited Investors.  The second part of the JOBS Act is what has been drawing attention in recent days due to significant changes in rules governing certain private offerings.  Historically, a Regulation D, Rule 506 offering has been exempt from SEC registration provided that the offering is not publicly advertised and that the purchasers are largely qualified institutions or “accredited” investors – those whose net worth is greater than $1 million (excluding a primary residence) or whose individual income exceeded $200,000 ($300,000 for couples) for the past two years with the expectation for that level of income to continue in the current year.  Title II of the JOBS Act called for the SEC to lift the ban on mass marketing these offerings, provided that the issuer reasonably believes and has taken reasonable steps to verify that the buyers of the private securities are in fact accredited.  Unlike Title I, this portion of the law required the SEC to issue final rules before going ‘live.’  September 23 was the day that the SEC’s new rules went into effect lifting the ban, and providing parameters as to how an issuer might go about verifying the status of investors.  Notably, the SEC also has issued newproposed rules that would impose additional filing and disclosure requirements for those issuers taking advantage of general solicitation, but these rules have not been finalized or put into effect.  Let’s call this portion of the law: 506(c) investing.
  • Title III of the JOBS Act: Public Securities Crowd Investing.  This next part of the JOBS Act is probably what the law is best known for: legalizing securities crowd investing.  More specifically, a company can raise up to $1 million within a 12 month period from the general public through a broker-dealer or ‘funding portal’ website.  Investors are subject to annual investment caps based on their income or wealth, and there are investor education requirements, as well as limits on general advertising.  This portion of the law also requires SEC rulemaking before it can ‘go live.’ The SEC is now nine months late on issuing new rules, although the prevailing expectation based on Commission statements is that proposed rules will be out this fall.  Nevertheless, until final rules are issued, securities crowd investing is not permitted.  Instead, only close cousin 506(c) investing is available to a limited percentage of the population.  For the sake of clarity, let’s differentiate between non-financial-return or donation-based ‘crowdfunding,’ Title II 506(c) investing, and Title III: crowd investing.
  • Title IV of the JOBS Act: Regulation A+.  This next title of the JOBS Act potentially increases the attractiveness of another securities registration exemption.  Regulation A has permitted the sale of securities to both accredited and unaccredited investors so long as the issuer files a mini-registration with the SEC and complies with relevant state law requirements in each state where funds are solicited.  One online issuer, Fundrise, has used this exemption to raise money from investors in Washington, D.C. and Virginia for a local commercial real estate project.  Title IV of the JOBS Act increases the offering limit from $5 million to $50 million in a 12-month period, requires that certain filings be provided to investors, and provides for annual audited financial statements.  This portion of the law requires SEC rulemaking before going live, which has to date not yet occurred.  For the sake of clarity, lawyers and wonks tend to call this portion of the law: Reg A+ investing.
  • Title V of the JOBS Act: Private Companies Stay Private Longer.  This final portion of the JOBS Act raises the threshold on the number of shareholders a company can have before it is subject to Exchange Act annual reporting requirements (e.g. a 10-Q or 10-K).  Previously, a private company could remain private until it reached 500 shareholders.  Title V changes this limit to 2,000 shareholders, or 500 shareholders who are unaccredited.  In combination with Title II of the JOBS Act, this change means that many private companies may be able to raise more money privately and remain private longer than in the past.  On the one hand this may potentially be in conflict with the goals of the IPO on-ramp, though on the other hand this may help facilitate a pipeline of companies mature enough to confidently enter public markets.

While the above explanation of some of the key provisions of the JOBS Act is by no means exhaustive, it is intended to shed light on key distinctions in the law.  It is critical that market participants understand these distinct capital-raising tools and related risks and opportunities.  And remember, the JOBS act isn’t just “crowdfunding,” but a heck of a lot more.

Chris Brummer is a professor of law at Georgetown University and a Senior Fellow at the Milken Institute; Daniel Gorfine is the Washington-based Director of Financial Markets Policy & Legal Counsel for the Milken Institute.  Direct link to Forbes article

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Curated by Antonio Ariston Arias, CEO & Co-Founder Healthy Crowdfunder Corp

Wharton Study Finds Crowdfunders Act Similar to VCs

Join us tackle healthcare issues - one of top 8 priorities of AnIdeaNation

Join us tackle healthcare issues – one of top 8 priorities of AnIdeaNation

On the eve of September 23, 2013, a historic day for all of us waiting for this 80 year old Securities Act of 1930s,  it is timely to reprint a study by Wharton professor Ethan Mollick who found that the sophisticated crowd can be as competent and even less biased than the traditional venture capitalists. For the uninformed, tomorrow is a milestone day when the US Securities Exchange Commission lifts the ban on general solicitation to accredited investors only. Welcome to the flat world of finance and marketing. As entrepreneurs, we envision better times ahead.

Highlights of  his findings:

1. Entrepreneurs who demonstrate a history of successful projects or ventures are more likely to be crowdfunded.

2. Entrepreneurs who demonstrate third party endorsements are more likely to be crowdfunded – social proof.

Comments: We have to start with our innermost circle of friends and influence. If the people who know us intimately cannot even support us, we have lots of work to do, before even reaching out to total strangers.

3. It is partially true that entrepreneurs who demonstrate preparedness are more likely to be crowdfunded.

Comments: We emphasize the importance of premarketing, investor relations, and/or public relations work prior to the actual fund raising event. Winning customers or investors is a relationship building exercise. It starts long before we ask for other people’s money either to buy our products or invest in our ventures. It is about building trust and credibility that we will deliver as we say we will.

4. Selected projects are less geographically concentrated in crowdfunding than in venture capital. VC-funded project typically happens in start-up clusters at 70 miles average distance to VCs.

Comments: Hello Silicon Valley, you now have competition with beautiful Vancouver, the land of eternal optimists, health afficionados, yogis, runners, skiers and/or organic food consumers. Crowdfunding is immune to the cluster effect of San Francisco, Boston, or New York. With strong protective but less costly investor protection measures and feature friendly equity platforms for entrepreneurs, the world is indeed flat.

5. Gender is less predictive of selection in crowdfunding than in venture capital.

Comments: Not only is the world flatter, crowdfunding is indeed unisex. Certain studies have found women make for better CEOs or leaders. What about we  immigrants who came to North America just like the early pioneers that left Europe? Crowdfunding  breaks down all political, cultural, or ideological boundaries. At Healthy Crowdfunder, the market we serve will all benefit from the health ventures we support, regardless of creed, race, countries, age, and the list goes on as we destroy biases of dated monarchies. It is not surprising to see so much resistance to crowdfunding in certain circles. It is a battle for survival for ancient fiefdoms. The roadblock is not the SEC. It is the secret powers behind closed doors trying to assert their final control.

Click here to read Professor Mollick’s  Wharton Study Finds Crowdfunders Act Similar to VCs.

Your comments are welcome. Feel free to connect with me Twitter @alamidas.

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September 22, 2013 · 1:02 pm

SEC Greenlights Funders Club and AngelList – Why Is This Significant?

by Antonio Arias, CGA

us sec

crowdfund the worldLast week the SEC served  “no action” letters to Funders Club  http://www.sec.gov/divisions/marketreg/mr-noaction/2013/funders-club-032613-15a1.pdf  and AngelList http://www.sec.gov/divisions/marketreg/mr-noaction/2013/angellist-15a1.pdf  which meant they can conduct their business without having to be registered as a broker dealer, provided they conduct themselves exactly as they have described to the SEC.

This is a significant event for several reasons.

  1. It is a good test balloon for the Securities Exchange Commission, the entrepreneurs, the equity based crowdfund portal operators, and accredited investors to operate in, while the non sophisticated audience  watch. There will be successes and failures but it will be with players who can afford to take the risks. If there will be a fallout, it will be in a contained environment.
  2. It will be an educational arena, where players can participate when they feel ready to jump in. For non-accredited investors they will see the process of what is really involved in buying and operating a business. Buying shares or equity of private or public companies is like being a silent partner to the business itself. It is a long term relationship as most businesses take about three to five years before breaking even.
  3. It demonstrates the goodwill intentions of the SEC to move forward, albeit slowly but it is better than no action at all. For now their position describes the acceptable boundaries of business conduct for all actors.
  4. For entrepreneurs who wish to grow their business, it expands the possibilities to raise funding beyond pre-sales/ rewards or donations based crowdfunding. While collecting “expressions of interest” in a platform, entrepreneurs will know right away if they could potentially win customers and/or investors.
  5. For me as a public company officer/director who has had to deal with sophisticated and non-sophisticated investors, a person’s wealth or education is not an indication of their investment maturity. There are speculators or high net worth gamblers in the marketplace. I strongly advocate investor education focused on specific industries for all investors, regardless of being  accredited or not. We are not specialists in everything. This is why with Healthy Crowdfunder, we will recruit management with specific domain expertise to guide the management of our client/ investees. In similar vein, a board would not hire a mining CEO to run a consumer product company or vice versa. A board will not hire a sales and marketing CEO type for a start-up that should be led by a science strong CEO. A company needs a strong sales and marketing type CEO only when it is ready to commercialize its products. Each business, sector, or industry has its unique characteristics that require different management skill sets  It would be presumptuous to think that each investor would be equally knowledgeable  or have the aptitude to tolerate the risks inherent in different sectors.

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Riding the Crowdfund Wave – the What How and Why

[Please play this slidecast on your desktop or laptop. At this time Ipad, Iphone, or other mobile does not work with voice]

What is the status of securities rules in the US and in Canada?

What type of equity based crowdfunding is allowed by the SEC? And why might the Canadian regulators might adapt the same?

What can entrepreneurs do now while waiting for the securities rules for non-accredited investor crowd?

How pre-marketing helps find and win customers and investors?

How accelerators/ incubators or mentors give entrepreneurs a marketing edge?

How can entrepreneurs/ investors profit financially and socially from crowdfunding?

Why are we in to crowdfunding?

Why should all investors support crowdfunding? What’s in it for them?

These are only some of the questions we answered. The audience asked more. What have you got for us?

Would you like to find ways you can profit from crowdfunding? Click below and join us at the 2nd Annual Global Crowdfunding Convention and Bootcamp

http://www.eventbrite.com/event/4077614254/Crowdfund/10023262109

 

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