The document discusses how equity crowdfunding regulations are changing to allow more regular investors to support startups. It notes that opening investment to more diverse groups of investors and companies will help develop a more diverse range of funded companies and investors. Data from surveys suggest many investors are motivated by supporting startups' missions in addition to financial returns and that relaxing regulations could enable more educated individuals to invest. The document argues equity crowdfunding could be important for funding fashion, design, and hardware startups and help address lack of diversity in venture capital funding.
Original Description:
Kartik Ram's talk on Equity Crowdfunding and the JOBS Act Title III ruling from Oct 30, 2015.
The document discusses how equity crowdfunding regulations are changing to allow more regular investors to support startups. It notes that opening investment to more diverse groups of investors and companies will help develop a more diverse range of funded companies and investors. Data from surveys suggest many investors are motivated by supporting startups' missions in addition to financial returns and that relaxing regulations could enable more educated individuals to invest. The document argues equity crowdfunding could be important for funding fashion, design, and hardware startups and help address lack of diversity in venture capital funding.
The document discusses how equity crowdfunding regulations are changing to allow more regular investors to support startups. It notes that opening investment to more diverse groups of investors and companies will help develop a more diverse range of funded companies and investors. Data from surveys suggest many investors are motivated by supporting startups' missions in addition to financial returns and that relaxing regulations could enable more educated individuals to invest. The document argues equity crowdfunding could be important for funding fashion, design, and hardware startups and help address lack of diversity in venture capital funding.
help diversify the types of companies that get funding. It will also help develop a more diverse group of investors.
ERIN GLENN, CEO, QUIRE
ON TREND . SOPHISTICATED . FASHION FUND
Who We Are
Rockstar team from Estee Lauder, McKinsey etc.
Many collective exits Deep background in regulatory compliance Understand the business of fundraising Plan to specialize in Regulation A+
Startup investing: no longer just for rich
On Oct 30, the SEC finalized rules to give regular people the opportunity to make investments previously limited to big-money folks. SEC voted 3-to-1 to open up equity crowdfunding to a much wider group of people. Startups will now be able to raise up to $1 million a year via online platforms. At the center of the change is the JOBS Act, which passed three and half years ago with bipartisan support in Congress. Much of the law has already been implemented.
Power to the People
Commissioner Kara Stein noted that the SEC will conduct a three-year study to evaluate how crowdfunding develops. "Let's see how this experiment works," she said. Supporters of the JOBS Act say the change will level the playing field for investors, while also giving startups the ability to raise money from more people. Critics fear the requirements for startups seeking investment will be too demanding, or that unschooled investors could lose their money.
Title III Differences
Startups have already been using equity crowdfunding companies like SeedInvest, Fashion Fund and CircleUp to raise capital -- but only from "accredited investors." businesses looking to raise $500,000 or more will be required to have financial statements reviewed by an auditor. Those raising between $100,000 and $500,000 must do outside financial review, but it doesn't have to be audited. And companies seeking less than $100,000 can submit their own statements.
Title III: The Diversity Antidote
Lack of diversity starts with venture capital firms. In the tech community, VCs are the arbiters of what lives by deciding who gets funded. Study after study has shown that VC firms are largely run by White/Caucasian men. Merely 8.2% of VC firm decision makers are female, and roughly 2% are Black or Latino. Wielding this power, VCs tend to fund founders who solve problems they can most relate to, and who are demographically similar to themselves. This has led to female and minority-founded businesses being vastly underfunded.
Title III: Diversity Data
Data curated from Mattermark and Quires recent Startup Investing Survey
Title III: The Qualification Delta
Lots of highly educated people cant invest under current laws. This inconsistency is irreconcilable, especially in light of what motivates people to invest. Of the respondents with a bachelors degree, 70% cant invest, and of those with a postgraduate degree/certification (e.g. PhD, MBA, JD, CPA, MD), 47% cant invest. While deemed competent to provide advice to others, these people are deemed incapable of making investment decisions for themselves, or at least of being held responsible for their decisions.
Title III: Qualification Delta
Data curated from Mattermark and Quires recent Startup Investing Survey
Title III: Investor Financial Knowledge
Data curated from Mattermark and Quires recent Startup Investing Survey
Title III: Investor Motivations
No doubt, people invest to make a financial return. 94% of our respondents marked that as a reason. 70% of respondents had additional motivations for investing. For them, investing isnt where they either make millions or they lose. For instance, the majority of our respondents would also invest to support a companys mission and founders. And nearly half would invest to spur innovation and job creation. These motivations arent surprising.
Title III: Investor Motivations
Data curated from Mattermark and Quires recent Startup Investing Survey
Title III: Conclusions
The SEC should certainly implement appropriate safeguards to protect investors, but we urge them to meet their mandate and allow everyone to invest in startups by finalizing Title III. We hope these results helped shatter some of the myths that are used to support the current prohibitions. And we hope that they shed light on the great impact that Title III can have when its finalized.
WHY
Fashions fade. Style is eternal
YVES SAINT LAURENT
Equity Investors by Category
Data curated from Mattermark and Quires recent Startup Investing Survey
Equity Crowdfunding for the Creative Class
Only viable source of equity funding for most fashion, design and hardware deals Significant upfront costs are required to finance the production over a period of months/years Revenues will not be generated until the production is complete Investment is highly speculative (no guarantee that the production will be a hit, however well made)
Equity vs. Debt
A means of raising funds to support the development of a business through the issue of shares in return for money Benefits Money doesnt need to be paid back Investor may bring added value to the business through their knowledge/ contacts etc Risks Loss of control - investor may influence the direction that the business takes in order to maximise the potential return on their investment - once youve issued shares in your business, you may not be able to control how these are subsequently traded
What Investors Look For
Growth potential the business must be scalable Market opportunity is there a market for the product/ service? Protection of assets - is their any IP in the business, and how will this be protected? You who are the people behind the business? Are they investable? Have they got the drive, commitment and skills necessary to take the business forward? Return on investment how much money can I expect to make from the sale of my shares in X years time, if all goes to plan? Risk what is the likelihood of this business failing to achieve its financial projections?
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