Propel Arizona hands on Crowdfunding workshop - Dec 2012

1. Practical
Crowdfunding
Workshop
www.propelarizona.com

2. Agenda
1. Crowdfunding overview
IP & Crowdfunding
2. Crafting the Idea and Campaign
3. Preparing the Visuals
4. Perks and rewards
5. Running a successful campaign
Practical
Crowdfunding
www.propelarizona.com Workshop

3. Crowdfunding
overview
1.

4. The Funding Gap

5. Concept to Product to Growth

6. Concept to Product to Growth
$ $ $ $

7. Concept to Product to Growth
Entrepreneur IPO
$

8. Concept to Product to Growth
Entrepreneur IPO
$
Venture
Entrepreneur Capital IPO
$ $

9. Concept to Product to Growth
Entrepreneur IPO
$
Venture
Entrepreneur Capital IPO
$ $
Angels, Venture
Entrepreneur accel & incub Capital IPO
$ $ $

10. Concept to Product to Growth
Angels, Venture
Entrepreneur accel & incub Capital IPO
$ $ $ $
$
Crowdfunding

11. Concept to Product to Growth
Angels, Venture
Entrepreneur accel & incub Capital IPO
$ $ $ $
$ $ Crowdfunding
Crowdfunding

12. Concept to Product to Growth
Angels, Venture
Entrepreneur accel & incub Capital IPO
$ $ $ $
$ $Crowdfunding $
Crowdfunding Crowdfunding

13. Concept to Product to Growth
Angels, Venture
Entrepreneur accel & incub Capital IPO
$ $ $ $
$ $Crowdfunding $
Crowdfunding Crowdfunding Crowdfunding
$

14. WYNTK(what you need to know)
Crowdfunding
Soliciting & Collecting relatively small amounts
of money (“funding”) from a large number of
people (“crowd”)
www.propelarizona.com

15. What is Crowdfunding

16. What is Crowdfunding

17. What is Crowdfunding

18. What is Crowdfunding

19. WYNTK
(what you need to know)
• Debt Crowdfunding
– microloans
– P2P lending
• Donation Crowdfunding
– Charity/Causes
– Kickstarter Model
– Rewards Based
– Pre-Order/Presumer
• Equity Crowdfunding
– JOBS act
www.propelarizona.com

22. Jumpstart Our Business Startup
ACT, Title III (JOBS Act).
5 APRIL, 2012 (AND … AUGUST 2012, DECEMBER 2012 …)

23. Equity Crowdfunding - JOBS
• Eliminates ban on general solicitation and general advertising in connection
with private offerings to accredited investors under Regulation D (Rule 506) and to
qualified institutional buyers under Rule 144A.
• Exemption from Securities Act registration “crowdfunding” transactions
(involving access to small amounts of capital through the internet).
• Exemption to allow issuance of up to $50 million of securities in any 12-month
period, up from the current $5 million threshold
• An increase in the number of shareholders a company may have before being
required to register its common stock with the SEC and become a public reporting
company from 500 to 2,000 total shareholders (including up to 500
“unaccredited” shareholders)
• Amount each person may invest in offerings of this type, tiered by the person's net
worth or yearly income.

24. http://www.pepperlaw.com

25. WYNTK (what you need to know)
BEFORE - (SEC “Reg D” Rule 504, 505, 506, 144a) … Since 1933
– 35 Unaccredited Investors (max), Unlimited Accredited
– 500 Shareholders (max)
– $1M max per 12 months, or $5M+ w/Reporting & restrictions
– No “General Solicitations”
AFTER - (JOBS Act) … 2012/2013, maybe
– General Solicitations – to accredited investors
– 35 Unaccredited Investors (max), Unlimited Accredited
– 500 Shareholders (max)
– $1M max per 12 months, or $5M+ w/Reporting & restrictions
– No “General Solicitations”
www.propelarizona.com

26. But,
if you think the JOBS act
moves the SEC into
the 21st century …

27. SAN FRANCISCO, Dec 6 (Reuters) - Netflix Inc said on Thursday
securities regulators warned they may bring civil action against the
company and its chief executive for violating public disclosure rules with a
Facebook post …

28. Fraud, Deceit, Scamming Widows,
Retirees and Helpless Babies.

29. Fraud?
• Case One: Australia – Equity Crowdfunding
• The Australian Small Scale Offerings Board (www.ASSOB.com.au), founded in 2007, is the largest investment crowdfunding
platform in Australia and one of the largest in the world. It is an equity crowdfunding platform that has successfully served
both accredited and non-accredited investors since its inception over 5 years ago, raising $130,409,669 since 2007. 132
companies have been funded to date and not a single case of fraud has been reported. ASSOB operates within the current
securities structure in Austral
• Case Two: UK – Equity Crowdfunding
• Crowdcube (www.crowdcube.com) is the largest equity-based crowdfunding platform in the UK has been operating since
February 15, 2011 with no reported fraud. Crowdcube operates within the current securities framework within the UK and
allows issuers to raise equity capital using an online portal.
• 29 pitches have been funded with £4.25M. Average raise is £146,552. Average equity given up is 16%. Average numbers
of investors is 63. Average days to fund are 51. Average age of entrepreneur is 40 and total number of registered investors
is 24,023. No fraud has been reported.
• UK based, Funding Circle (www.fundingcircle.com) was founded in 2010. It is an online marketplace enabling savers and
investors to sidestep banks and directly lend to small businesses. Funding Circle differs from other lending platforms in
that it facilitates loans to businesses, rather than consumers while also proving easy access to investors’ money at any time.
It provides low cost finance for small, UK firms frustrated by the loan terms offered by the
http://www.crowdfundcapitaladvisors.com/resources/26-resources/120-crowd-detects-fraud.html

30. Fraud?
• Case Four: US - Fraud Derailed
• An example of fraud that was derailed on a portal is a campaign on Kickstarter called Mythic. From
Techdirt.com:
• “A recent video game project on Kickstarter that turned out to be fake. As BetaBeat reports, the
crowdsourcing scam was exposed by a crowdsourced investigation:
• ... a campaign for an action video game, MYTHIC: The Story Of Gods and Men, has just been busted by
forum users at Reddit, SomethingAwful and Rock, Paper, Shotgun. The creators claimed to be an
independent studio, “Little Monster Productions,” of 12 industry veterans in Hollywood. “Our team has
done a significant amount of work on the World of Warcraft series as well as Diablo 2 and the original
Starcraft,” says the project page.
Bull____, said the Internet. Turns out the art was cribbed, the text for backer rewards was copied and
pasted from another Kickstarter project, and even the office photos were from another game studio,
Burton Design Group.
• When people brought their accusations to the Kickstarter comments, the developers made a few weak
attempts at deflection then quietly shut down having raised just under $5,000 (far short of their goal, so
that money won't actually be released). With Kickstarter gaining more attention every day, we're sure to
see more attempts at scams—and maybe even some successes—but with a savvy community that polices
itself like this, the scammers face an uphill battle.”
http://www.crowdfundcapitaladvisors.com/resources/26-resources/120-crowd-detects-fraud.html

32. Bull____, said the Internet. Turns out the art was
cribbed, the text for backer rewards was copied and
pasted from another Kickstarter project, and even the
office photos were from another game studio,
Burton Design Group.
http://www.crowdfundcapitaladvisors.com/resources/26-resources/120-crowd-detects-fraud.html

34. WYNTK (what you need to know)
• Equity Crowdfunding - not in the USA (yet)
• JOBS act (April 2012) technically enables CF – but has
not yet been approved by SEC.
• No documented fraud in USA or other areas.
• Equity CF is for “high growth companies” seeking
significant funding from experienced investors
• Will dramatically change in 3-5 years (CJ prediction)
www.propelarizona.com

35. Real Crowdfunding –
that works.
Today

36. Rewards-based, Donation Crowdfunding:
“THE KICKSTARTER MODEL”

40. ALL OR NOTHING

41. Perks &
Rewards

42. Updates (and Blogging)

43. Updates (and Blogging)

44. Comments & Engagement

45. http://www.crowdcrux.com/wp-content/uploads/2012/12/kickstarter-vs-indiegogo1.jpg

46. Kickstarter 2011
• Let’s look at some statistics for 2011:
• Launched Projects: 27,086
• Successful Projects: 11,836
• Dollars Pledged: $99,344,382
• Rewards Selected: 1,150,461
• Total Visitors: 30,590,342
• Project Success Rate: 46%

47. 1a
A Few Words about
Intellectual Property
.
and Crowdfunding …

48. IP & CROWDFUNDING
Mary Juetten
mejuetten@traklight.com
@traklight; facebook.com/traklight
ASUEF

49. Big Idea? Before you
post:
IDENTIFY IP:
- Existing & filed or
protected
- Ideas
- Know how
Who owns it?
Patent vs. Trade Secrets
Enabling Public Disclosure

50. PROTECT IP
• Mentors – ASU Venture
Catalyst/Furnace
• Free Resources:
- IP CLOUD
- CEI/Gangplank/COHOOTS
- SCORE/SBDC
- ACA – Innovation
Challenge
-USPTO & Copyright office
TRAKLIGHT – ASUEF

51. WHY …
1b
Do people Crowdfund?
.

53. Lessons from Ethan Mollick’s “The Dynamics of Crowdfunding: Determinants of Success and Failure”

54. 3 Why’s …
There are three main reasons why people unconnected to a
project or business would support it:
• 1. They connect to the greater purpose of the campaign
• 2. They connect to a physical aspect of the campaign like the
rewards
• 3. They connect to the creative display of the campaign’s
presentation
• What Is Crowdfunding And How Does It Benefit The Economy - Forbes
http://www.forbes.com/sites/tanyaprive/2012/11/27/what-is-crowdfunding-and-how-does-it-benefit-the-economy

55. Overall (Crowdfunding) Why’s
• Passion
– For the technology
– For the industry
– For the cause
– For the product
• Affinity
– For the Entrepreneur
– For the region, industry etc
• Connection
• Every reason BUT R.O.I. …

56. WYNTK (what you need to know)
Crowdfunding is about …
emotional ROI.
Not financial ROI
www.propelarizona.com

57. WYNTK
(what you need to know)
(when crowdfunding …)
“its not what you do, but
why you do it,”
www.propelarizona.com

58. http://www.kickstarter.com/projects/1104350651/tiktok-lunatik-multi-touch-w

60. http://trendwatching.com/trends/infographics/presumers/
• “Consumers who want products before they
are developed”
• Pre-orders
• Supporters

61. The Kickstart Model..
UH OH …

64. http://www.indiegogo.com/blog/2011/11/indiegogo-insight-campaigns-with-teams-raised-180-as-much-money-as-ind

65. WYNTK(what you need to know)
1. Crowdfunding = New “1st Money” for ventures
($10k - $50k average– but wild exceptions)
2. Equity Crowdfunding is Still Far away
3. Rewards based Model IS Crowdfunding today
4. All or Nothing Crowdfunding – Standard
5. Perks and Rewards: Pre-order Crowdfunding
6. Social Media & Content Intensive
www.propelarizona.com

66. HOW to Crowdfund?
1. PRE - Preparing
2. PUSH - Running the campaign
3. POST – Delivering on your Promise

67. Some initial rules ….

68. WYNTK(what you need to know)
1. Crowdfunding takes work, new skills.
2. It takes a strategy, and preparation.
3. The rules are different.
4. You can’t just post and run …
5. It’s a public success or failure – that “stays on
your resume”
www.propelarizona.com

69. 2.
Crafting the Idea
and Campaign

70. HOW to Crowdfund?
1. PRE - Preparing
– Build Credibility
– Sharpen Pitch & Post
– Perks and Rewards
– Timefames & $$

71. first …
What does success
look like?

72. • The iPhone-friendly Pebble watch earned $7.6
million more than its $100,000 goal.
• And the Galileo iPhone platform closed its
Kickstarter campaign at $702,000, far
surpassing its $100,000 goal.

73. • Ouya raised $2 million in one day for a new Android gaming
console (it’s raised more than $5 million to date),
• the Nifty MiniDrive, external memory for Apple MacBooks.
The tiny storage company is more than 2,000% above its
$11,000 goal with 15 days left in the campaign.

74. What do successful
campaigns have in
common?

75. http://www.kickstarter.com/projects/hop/elevation-dock-the-best-dock-for-ip

76. Projectio
http://www.kickstarter.com/projects/1209578799/projecteo-the-tiny-instagram-projector

77. http://www.kickstarter.com/projects/1719196889/iceblink-engine?ref=home_location

78. http://www.kickstarter.com/projects/812916345/magnet-comic-a-custom-magnetic-and-dry-erase-comic?ref=hom

79. http://www.kickstarter.com/projects/mikebond/ti2-sentinel-titanium-cache?ref=home_popular

80. http://www.kickstarter.com/projects/poots/kingdom-death-monster?
ref=home_popular

81. http://www.kickstarter.com/projects/smartthings/smartthings-make-your-
world-smarter?ref=category

82. http://www.kickstarter.com/projects/thejumpshot/jumpshot-a-new-weapon-to-
battle-pc-frustration?ref=category

83. http://www.kickstarter.com/projects/374405221/mary-elizabeths-sock-
the-first-book-collection?ref=home_location

84. http://trendwatching.com/trends/infographics/presumers/

86. 7 habits of highly successful
crowdfunding campaigns
1. They already have fan bases
2. They build off of something familiar
3. They are simple
4. They are (usually) NOT about the company
5. They appeal to a specific interest ….
6. They are BUZZWORTHY ….
7. They work really hard at it!

87. Before you start, remember …
• For your target,
– It's about emotion
– It’s about “eliteness”
– … being part of the cool group
– feeling like you're important -
– feeling powerful! Influential

88. WYNTK
Successful Crowdfunding
Campaigns Focus on
The new 4 P’s …
(what you need to know)
the
1.
the the the
2. 3. 4.
www.propelarizona.com

89. The new 4 P’s of the WHO are they?
1.
What motivates them?
Crowdfunding .. Interests, Values …
focus on “them” –
not your company
the the the
2. 3. 4.
You are pitching to “them” $$ Value is a negative driver ! It’s a daily/hourly effort …
TELL A STORY !! UNIQUE SOCIAL MEDIA
WHY is more important than $$ It’s about THEM It’s a conversation …
VIDEO(s) & VISUAL(s) EXCLUSIVE UPDATES, BLOGS, NEWS
Tell the story in small ‘chapters’ And what is important to “Them” Provide Value, and Talking
Points
VIDEO(s) & VISUAL(s) FIRST RE-POST, TWEETable
And even smaller “sound bites” Make sure it is … It’s about … for their network
Give them a Story they BUZZWORTHY VALIDATION & EVIDENCE
can tell to others.
www.propelarizona.com

90. First Exercise(s)

91. Checklist
1. Idea-check: (focus on target)
– About “them” not you.
– Emotional appeal: Passion, exclusivity, emotion.
1. Funding Level
– Realistic (for you and them)
– Use of proceeds
1. Timeframe
2. Possible perks (not yet)

92. Assignment

93. 1. Idea
– What’s the story
– What’s the emotional appeal, benefits
1. Who are the targets
– Benefits. Connections
1. Describe, tell story.
2. What visuals should you provide.
3. How much, how long? When done?

94. Preparing
the Visuals
3.

95. Perks
and rewards
4.

97. American Grandmaster
a Patrick Million FILM
Directed by
Patrick Million
Executive Producer
CJ Cornell

98. Rewards Crowdfunding
• Incentives & perks
• Pre-Orders
• Pre-Sumers
• Market Validation

100. Rewards don’t have to worth $$

102. • $25 perk is the single most claimed perk,
representing nearly 25% of all perks that are
selected.
• While the $25 dollar perk is only responsible
for raising 11% of total funds.

103. • $100 perks raise more money than any other
perk price and make up nearly 30% of total
funds. A $100 perk combined with the next
three perk price points: $50, $500, and $1000
makes up about 70% of total money raised by
perks

105. some
Rules for Rewards

106. 1. Make them
unique &
Exclusive

107. 2. Target them

108. 3. Give them a
connection

109. “The
Cocktail Party
Effect”

110. “The
Restaurant
Effect”

111. “The
Carey School
Effect”

114. Assignment

115. 1. What is important to your target?
2. What rewards can connect them to you or
your project
3. What rewards are part of your project
4. What unique rewards can you think of (that
others are not doing)
5. What rewards will get them talking to others!

116. Running a 5.
successful campaign

117. HOW to Crowdfund?
1. PRE - Preparing
2. PUSH - Running the campaign
3. POST – Delivering on your Promise

118. HOW to Crowdfund?
PUSH - Running the campaign
• Social Media
• Comments & Updates
• Networking
• Personal Pitches

119. http://www.indiegogo.com/blog/2012/05/indiegogo-insight-campaigns-that-take-these-
six-actions-raise-8-times-more-money-than-campaigns-that-dont.html

120. http://www.indiegogo.com/blog/2012/05/indiegogo-insight-campaigns-that-take-these-
six-actions-raise-8-times-more-money-than-campaigns-that-dont.html

121. http://www.indiegogo.com/blog/2012/07/indiegogo-insight-winning-the-
middle-game.html

122. http://online.wsj.com/article/SB10000872396390443855804577601013094
084438.html?mod=googlenews_wsj#articleTabs%3Darticle

123. successful campaigns raise, on average, 49%
percent of their goals during the first and
last 10% of the campaign length.

124. Your mission: To get
them talking about
your project

125. http://www.kickstarter.com/projects/1209578799/projecteo-the-tiny-instagram-
projector?ref=home_popular

126. • most successful projects receive about 25-40% of
their revenue from their first, second and third
degree of connections.
• This could include friends, family, work
acquaintances, or anyone that the owner is
connected to, including their second and third
degree connections.
• http://www.forbes.com/sites/tanyaprive/2012/11/27/what-is-
crowdfunding-and-how-does-it-benefit-the-economy/

127. Continue the story…

128. Social Engagement
– Transparency & Trust
– Social Proof & Viral FX
– Engagement & “The Fundamentals”
– Twitter
– Facebook
– Blogging

129. 1. Create:
- A Facebook Account
- A Twitter Account
(for your campaign)

130. 2. Tweet & Post
–Frequently
–Uniquely
–Personally

131. 3. Post Updates & Blog
• About your progress
• About the subject
• About the industry
• About the People

132. 4. Go 1-1
• Reply to comments
• Retweet/Repost
Your fans and donors are your most
powerful advocates!

133. 5. Target, Measure & Adjust
• Different Messages for different
groups
• Google, Hootsuite, others
• Learn and Adjust focus

134. Metrics
http://www.perlsteinlab.com/blog/anatomy-of-a-crowdfund-week-3-slow-and-steady

135. Metrics
http://www.perlsteinlab.com/blog/anatomy-of-a-crowdfund-week-3-slow-and-steady

136. •
the importance of google analytics to track
and improve performance
• + perks from fivvr
•
• http://www.perlsteinlab.com/blog/anatomy-
of-a-crowdfund-week-3-slow-and-steady

137. HOW to Crowdfund?
POST - campaign
• Thanks …
• Perks and rewards
• Updates
• Completing your goals !!

138. The most important
secret is …

139. Showing Momentum
(the perception of momentum)

140. The most obvious
secret is …

141. Credibility
= trust, competence
& follow-through

142. Practical
Crowdfunding
Workshop
www.propelarizona.com @PropelArizona