LAUNCH Festival to Attempt First Live Crowdfunding Event

For the past few years Jason Calacanis’ LAUNCH festival has been one of the premier venues to — you guessed it — launch a hot new startup in the hopes of attracting serious investment dollars.

When the JOBS Act was signed into law last year, Calacanis saw an opportunity to broaden the potential sources of those investment dollars by incorporating a real-time, live crowdfunding campaign into the annual event.

LAUNCHFest 2013 kicks off Monday, and we still don’t have an official equity crowdfunding system in place for non-accredited investors, but Calacanis and Company have found a way to move forward with their live crowdfunding experiment anyway.

MicroVentures, LAUNCH and SourceBits teamed up to develop a special app for the festival, which runs March 4 – 6 in San Francisco.

“At the event, accredited investors can use the app to show interest in investing in the 50 startups (launching) on stage. If you make a commitment, it’s a non-binding show of interest,” explains Calacanis via an e-mail. “Your contact information is sent to the startup, and you two can get coffee in one of our Davos-style offices.”

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While waiting for SEC regulations, crowdfunding leaders focus on investor education

By Mohana Ravindranhath

Some crowdfunding industry leaders are using the lull before the fundraising practice is publicly viable to develop educational material for people who may soon be making their first investments.

The Securities and Exchange Commission is currently drafting rules to allow start-ups to sell stakes in their companies to the general public, potentially raising large sums from crowds of small investors.

Until now, selling equity stakes has been limited to so-called accredited investors, people who presumably have the wherewithal and sophistication to know what they are getting into.

Crowdfunding opens the field to the general public, and critics worry the newcomers may not adequately understand the risks involved in sinking money in a untested company.

Enter crowdfunding supporters such as the Crowdfunding Professional Association, a trade group for entrepreneurs, lawyers and investors. The organization is preparing to launch a Global Crowdfunding Education Network, intended to provide online classes and legislative updates for investors and entrepreneurs looking to participate in crowdfunding.

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Interested in crowdfunding? 5 priceless pieces of advice

By Kurt Wagner

FORTUNE — Investing successfully in startups takes more than a pocketful of cash. That’s the message venture capitalists and securities regulators hope to transmit to those interested in equity-based crowdfunding, a new form of investing currently awaiting regulatory approval. Ordinary investors will soon have the opportunity to invest in early-stage startups in exchange for company stock. Today, only a small percentage of investors, those who meet certain income and wealth requirements, are effectively able to invest in startups in exchange for equity.

The change is part of the JOBS Act — a.k.a. the Jumpstart Our Business Startups Act — a law signed by President Obama last April. One of its aims is to increase early stage startups’ access to capital. Crowdfunding sites like the wildly popular Kickstarter currently permit prospective ventures to raise funds through what is essentially a donation system. No doubt, millions have been raised to fund the development of gadgets, movies, art projects, even small businesses. But in exchange for their donations, supporters receive small gifts, future discounts, or perks — not a stake in the company. The new law could make this type of fundraising process more appealing to investors because they will receive partial ownership in exchange for their investment.

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Crowdfunding, from your smartphone

By Hayley Tsukayama

Crowdfunding is poised to be bigger than ever in 2013, with fundraising successes such as the Pebble watch and the Ouya game console both getting ready to launch their long-awaited projects.

But crowdfunding is more than just bringing neat products to market. At next month’s Launch startup festival, MicroVentures — a company that vets investors and gives them access to potential deals — will work with the conference and other partners to let startups do some live fundraising as they present their ideas on stage.

That will be facilitated through a new mobile app, said Tim Sullivan, chief executive of MicroVentures. The company developed the app, Sullivan said, because there was previously “no way through mobile devices that you can adequately see what’s out there in terms of companies that you might want to invest in.”

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New Crowdfunding Sites Boost Health Startups

By Arlene Weintraub

When Dave Chase was looking to crowdfund his new company, Avado, last summer, he bypassed well-known sites like Kickstarter and went straight to Medstartr, which caters to health-related startups.

Seattle-based Avado makes technology tools that patients and physicians can use to communicate with each other—a mission that resonated with Medstartr’s audience of health-minded individuals. Within two months of posting a video and description of Avado on the site, Chase surpassed the $5,000 fundraising goal he had set and ended up bringing in $7,585.

In addition to the capital, Chase says, he gained valuable experience that he parlayed into a round of angel financing. “The Medstartr experience was critical for crisping up our story,” Chase says. “It helped us communicate the heart of what our benefit was to both patients and providers.” Chase took what he learned, used it to post a description of his company on AngelList—a site that matches financiers with entrepreneurs—and ended up raising $1 million in January.

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Deloitte Predicts Crowdfunding Portals Will Have Increasing Impact On Venture Capital and Other Traditional Funding Sources in 2013

Deloitte released the company’s Technology, Media and Telecommunication predictions for 2013 and one particular section on crowdfunding caught our attention. Among Deloitte’s predictions:

  •  Between 2008 and 2012, crowdfunding portals likely lent more than $1.5 billion. In 2013 these loans could exceed $1.4 billion, up more than 50 percent from 201261.
  • In aggregate, crowdfunding portals are already a multi-billion dollar industry, growing at more than 50 percent a year.
  • Traditional venture capital raises about $40 billion annually67; charitable giving was almost $300 billion in the United States alone in 201168, and the pay day loan market in the United States was worth more than $50 billion in 200869. In each category, crowdfunding is growing much faster than traditional sources of funding, but still represents less than one percent of the total.
  • In a recent survey, seed financing from VCs was down almost 50 percent year-over-year78, indicating that there may be a funding gap for crowdfunding to fill.  Crowdfunding also brings the potential for more democratic or broader access to capital for startups and innovators without personal connections to capital.

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How Crowdfunding’s Secondary Market May Evolve

One of the interesting points that emerged from last week’s Sunshine Act meeting of the SEC Advisory Committee on Small and Emerging Companies was the following recommendation:

The U.S. Securities and Exchange Commission should facilitate and encourage the creation of a separate U.S. equity market or markets for small and emerging companies, in which investor participation would be limited to sophisticated investors, and small and emerging companies would be subject to a regulatory regime strict enough to protect such investors but flexible enough to accommodate innovation and growth by such companies.

In referencing “sophisticated investors,” the SEC is specifically referencing accredited investors. The SEC cannot make an exchange, but this recommendation suggests a willingness to help solve a big problem for small business. Small business equity is illiquid, and this fact hinders economic growth.

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Crowdfunding: It’s Not Just For Startups

Ever since the boom of Kickstarter, and the passing of the JOBS Act last April, crowdfunding has become part of the investment vernacular. What started out as a funding portal for art projects, band albums, small businesses, and budding entrepreneurs, has now grown into a mature investment opportunity for businesses of all sizes.

There are currently two different methods of crowdfunding available through a number of platforms. Donation (or some refer to it as reward) crowdfunding is the better-known version, allowing project creators to accept monetary contributions in exchange for an incentive. This process can include small businesses, entrepreneurs, fund my life campaigns, and creative projects, all depending on which platform they are hosted on.

Investment crowdfunding is the opposite method, allowing companies to sell a percentage of ownership in their company to accredited investors (future regulations established by the Securities and Exchange Commission will allow non-accredited individuals to invest in private ventures in the near future). This method is reserved for incorporated companies that are looking to raise anywhere from $100,000-$5,000,000.

Project creators or entrepreneurs create donation crowdfunding campaigns for a multitude of reasons. While some of these businesses are looking for an injection of funds to keep their brand alive, there are many well-established companies who are utilizing this process for its marketing prowess.

Villy Custom Bicycles, a flourishing bespoke bike company funded on ABC’s Shark Tank by Mark Cuban and Barbara Corcoran, chose to run a campaign on RockThePost, the crowdfunding platform I co-founded. Not looking to raise funds, Villy Custom was more interested in testing the market for their upcoming line of glow in the dark bikes entitled “Reflecta-Glow.” After raising over $10,000 from a number of different contributors, they finally got the clear answer they had come for. People were interested in their product, and were willing to pay in advance.

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Real Estate: the Next Crowdfunding Boom?

By Liyan Chen

The JOBS Act has led to the boom of crowdfunding platforms across many industries, and it seems like it is also poised to change the face of the real estate financing. As Bloomberg pointed out recently, the implementation of the JOBS Act will open up opportunities for real estate crowdfunding start-ups by saving them time and money on the legal process.

Here’s some background: Before the passage of the JOBS Act, real estate financing was mainly available to accredited investors under Regulation D of the Securities Act of 1933. But the JOBS Act, which eases restrictions on investments, will allow more individuals, including non-accredited investors, to invest up to $2,000 a year or 5 percent of their income or net worth in commercial real estate projects.

Currently, these real estate crowdfunding platforms, like Washington, D.C.-based Fundrise for example, have to go through a lengthy approval process by the SEC and local regulators.

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Mary Jo White to Lead SEC: Crowdfunding Implications?

By Anton Root

President Barack Obama nominated Mary Jo White, a former federal prosecutor, to chair the Securities and Exchange Commission (SEC) earlier today.

White first rose to national prominence in 1993, when she became the U.S. attorney for the Southern District of New York, a position she held until 2002. While there, she oversaw the prosecution of high-profile individuals like mafia boss John Gotti, terrorist Sheik Omar Abdel Rahman, and even Osama Bin Laden. But she is best known for being a tough leader with a knack for punishing white collar crime. “You don’t want to mess with Mary Jo,” the president said when announcing his nomination.

“When it comes to prosecuting white collar criminals, she’s got an outstanding track record,” Douglas Ellenoff, of Ellenoff Grossman and Schole LLP, told “She’s really an interesting and credible pick for the president, as it relates to the administration’s – and now the SEC’s – commitment to enforcing violations of securities laws.”

The Congress is expected to support the nomination, though some may question her knowledge of complicated financial laws. Her trips back and forth through the public-to-private-sector revolving door may also raise a few eyebrows: before and after her stint overseeing New York’s Southern District, White practiced law at Debevoise & Plimpton, defending some of the biggest names on Wall Street.

What does White’s selection to head the SEC mean for crowdfunding and the JOBS Act?

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