Investment Crowdfunding under the JOBS Act – coming on May 16!

Investment Crowdfunding under the JOBS Act – coming on May 16!

It’s been over four years since the JOBS Act was signed be President Obama and in a few weeks, starting May 16, you will actually be able to raise money under the federal crowdfunding exemption that the JOBS Act created.

Here are some things to know to help you decide whether it’s right for you!

Fun Fact! What does the CROWDFUND Act stand for?

Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act.

Do I have to have a U.S. company?

Yes, only U.S. companies can take advantage of the crowdfunding exemption.

How much can I raise?

You can raise up to $1 million in any one year period.

Do I have to use an online platform?

Yes. You can only raise money under the Crowdfunding Exemption by posting your offering on an online platform that has been licensed by the Securities and Exchange Commission. In fact, all of the communications with potential investors must take place through the platform.

What is the per-investor cap?

(i) If either the investor’s annual income or net worth is less than $100,000, the greater of $2,000 or 5% of the lesser of the investor’s annual income or net worth; or

(ii) If both the investor’s annual income and net worth are equal to or more than $100,000, 10% of the lesser of the investor’s annual income or net worth, not to exceed $100,000.

Note that this is a cap on what an investor can invest in all crowdfunding campaigns in a year.

How am I supposed to know if an investor is within the per year cap?

You can rely on the efforts of the crowdfunding intermediary to ensure that the aggregate amount of securities purchased by an investor will not cause the investor to exceed the limits, provided that you don’t know that the investor has exceeded the investor limits or would exceed the investor limits as a result of purchasing securities in your offering.

Are state level filings required?

Only the state of your principal place of business and the state where more than 50% of your investment comes from can require a notice filing and a fee.

Can I be raising in a different way at the same time?

Yes! Unlike many other capital raising strategies, you are allowed to raise money under the crowdunding exemption at the same time that you are raising money in another way, such as through a private placement.

What filings are required?

When you set up your offering on a platform, you have to complete a form that provides detailed information about your company and your offering.

If you’re raising $100,000 or less, you have to provide tax returns. If you’re raising more than $100,000 you have to provide financials reviewed by a CPA. Reviewed financials can cost several thousand dollars.

You also have to file an annual report which is required to be posted on your web site.

Can people who buy securities in my offering re-sell them to someone else?

Yes, but not before one year after the initial purchase.

What else do I need to know?

I would recommend finding a Title III platform and reading through all of their terms of use, instructions, etc. for issuers raising money under Title III. There are 37 organizations currently working on getting approval to be a crowdfunding portal.  We don’t know for sure which ones will be up and running on May 16.

Be sure to subscribe to my newsletter to get up to date information as the crowdfunding exemption starts to get tested in the real world!

Interested in learning more? Get in touch!

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Investors are Incredibly Diverse

Investors are Incredibly Diverse

When you think of investors, what do you picture?  White guys in suits or khakis looking for the next Snapchat?

Or do you picture a group of young people who say things like this:

To invest is to put resources (energy, work, finance, love) into something to create change over time.  We must seek, with our investments, to fundamentally change the very shape of the economy.

At the Confluence Philanthropy Gathering in Boston, I caught up with Kate Poole, one of the founders of Regenerative Finance.

Regenerative Finance is an organization of young people “with access to wealth and class privilege who believe in a more just world. . . . Regenerative Finance shifts the economy by transferring control of capital to communities most affected by racial, climate and economic injustice.”

The members of Regenerative Finance look nothing like the stereotype of an investor and their goals and worldview could not be more different from the typical venture capitalist or investment fund.

When you picture an investor, keep an open mind!  That kid with all the piercings and tattoos sitting next to you at the coffee shop could be your next investor. Approximately 55% of Americans invest in the stock market. Many more have savings at financial institutions.

A majority of the population of the U.S. is made up of investors! The more you broaden your definition of potential investors, the greater success you will have raising capital. Instead of fishing in that tiny pond of venture capitalists, professional angels, and investment funds, why not fish in the ocean of non-professional investors – some subset of which might be really excited by your vision and passion.

Interested in learning more? Get in touch!

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Getting Investment to the Grassroots

Getting Investment to the Grassroots

confluenceI was on a panel recently at the Confluence Philanthropy gathering in Boston. This is an annual gathering of philanthropists that are looking for ways to effectively invest their resources in enterprises making a positive impact in the world.

The panel was called “Getting Impact Capital to the Grassroots.” My co-panelists talked about some incredibly innovative community-led initiatives designed to deploy capital in a way that truly benefits disenfranchised communities.

The Democratizing Capital East Bay (DCEB) project, funded by Solidago Foundation, is an initiative that is working with grassroots community organizations in Oakland, California like Mujeres Unidas y Activas, Asian Pacific Environmental Network, and the Ella Baker Center to create an investment fund whose focus will be decided by these organizations that represent low-income community residents. These groups are being paid to participate in the planning process and are receiving education about investing so that they can make informed decisions. Once the fund is launched, it will be open to investment by any California resident. The minimum investment amount will be low so that the opportunity to invest will be more accessible.

The Massachusetts Solidarity Economy Initiative (MSEI) has an impressive goal: to build a movement capable of transforming dominant capitalism. This initiative, convened by Access Strategies Fund, includes 14 grassroots groups that are led by people of color. Like DCEB, this initiative is investing significant time and resources to simply listen to the people it intends to serve. These listening sessions have resulted in a model for a solidarity economy with the values of love, art, culture, healing, and community at its base. Also like DCEB, the participants are paid for providing their insights and wisdom to the initiative. Their contributions of knowledge capital are seen as just as valuable as financial capital.

Pioneer Valley Grows Investment Fund is farther along than DBEC and MSEI in its development – after years of planning and community outreach, it is open to investment! This is an investment fund, open to both wealthy and non-wealthy investors that invests in building a healthy food economy in the Pioneer Valley of Massachusetts.

It is thrilling to see the proliferation of initiatives all over the country designed to invest in the grassroots local economy!

Interested in learning more? Get in touch!

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Winning that Pitch Competition was the Worst Thing that Ever Happened to Her!

Winning that Pitch Competition was the Worst Thing that Ever Happened to Her!

I recently had a new client sign on to work with me to raise capital. Her dream is to develop a retail shop targeted at creative people. She wants to set one up and eventually franchise it all over the country. This is her passion because when she was going through tough times, she found that exploring her creative side saved her from the abyss.

She was invited to enter a pitch competition. Her passion showed and the judges were captivated. She won the competition!

Many months later she and I talked and I heard what happened next. The “prize” for winning this competition was that she got to pitch a whole bunch of the top venture capitalists in Silicon Valley.

Why would anyone recommend that someone who wants to start a retail shop pitch to VCs when this is so obviously not the kind of business that VCs are looking to invest in?

Maybe they thought it would somehow help her get some ideas for improving her business.

Well, that is not what happened. What happened was (1) the VCs told her to change her business model to try to make it more like the type of business a VC would invest in and (2) she felt like she was crazy because none of them really got what she was trying to do.

She changed her business model into something that she wasn’t excited about. She got demoralized and depressed. Great prize, right?

Lesson learned: Do not waste time pitching to investors that are not a good fit for you! It is worse than a waste of time. It can take you completely off track, make you feel alone, and plunge you into despair.

Interested in learning more? Get in touch!

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The Curious Case of Ben & Jerry’s: A Cautionary Tale for Social Entrepreneurs


The tale begins in 1978 when two partners, Ben Cohen and Jerry Greenfield, founded a gourmet ice creamery in a renovated gas station in South Burlington, Vermont. Ben and Jerry ran their business so it was fair to its employees, kind to the environment, and kind to the cows who provided the raw product they used to create their ice cream. They called their pursuit of both profits and people the “double dip.” Their slogans such as “Peace, Love, and Ice Cream!” made them poster children for “hippie” corporations — in other words social enterprises, companies that make a positive impact on the world while also making money.

Initially, Ben and Jerry offered stock in their company to Vermont residents only using a Direct Public offering. The idea was to “spread the wealth” to their immediate community. Following a national stock offering in 1985, Ben & Jerry’s Ice Cream established a foundation and committed 7.5% of its annual pretax profits to fund it. Cohen and Greenfield also devised a simple three-pronged mission statement in which they pledged to manufacture the world’s best ice cream, to run a financially successful company, and “to make the world a better place.”

Ben & Jerry’s Ice Cream continued to build its business on the bedrock of its social values. The company sourced its ingredients from regional organic dairy farms. It only used milk that did not contain artificial growth hormones. It even went to court for the right to label its ice cream hormone-free. Then it developed chemical-free containers, and made fair-trade and organic ingredients priorities in their manufacturing process. It also took steps to reduce its trash output, creating a more sustainable overall carbon footprint for its operations. It opened scoop shops in inner city neighborhoods for the purpose of creating jobs for low-income community residents.

In other words, the mission the company’s founders was having a major positive impact.

But in 2000, Unilever, an Anglo-Dutch consumer goods conglomerate, offered to buy Ben & Jerry’s Ice Cream at 25% over the company’s estimated value. Cohen and Greenfield did not want to sell. They voiced concerns that Unilever would neglect if not abandon outright all the socially responsible aspects they had worked so hard to incorporate into their operations. However, as a publicly held corporation, Ben & Jerry’s Ice Cream was worried that they would be sued by their shareholders if they did not maximize shareholder value.

You probably know how this story ends. Ben & Jerry’s Ice Cream was eventually sold to Unilever for $326 million. Cohen and Greenfield each took multi-million paychecks as part of the deal. However, in a statement released to the press, the founders agreed that they would have preferred that their company remain independent.

Cohen and Greenfield’s fears were soon realized when Unilever began shuttering Ben & Jerry’s Ice Cream factories and laying off employees in order to create operational “synergies.” Unilever also reportedly took steps to decouple the corporation from its employees’ ideals. And customers worldwide have denounced the current quality of company’s product as far inferior to what Cohen and Greenfield had produced during their heyday.

Obviously this summarization glosses over many important details in the tale of Ben & Jerry’s Ice Cream. And of course this case has bred numerous dissenting opinions.

Frankly, to my mind, that isn’t the point. The point is this:

Aspiring social entrepreneurs need to plan early to prevent the forced sale of their companies!

For now, the best advice I can you is this: you shouldn’t go it alone.

It has never been more important for social entrepreneurs to have good coach, advocate, attorney, and strategist in their corner. I am all those things in one, and I would love to play that role for you!

Over the past 20 years, I’ve helped social enterprises structure and raise financing in total alignment with their long term goals and values. If you run a socially-responsible business or are thinking of starting one today!

Interested in learning more? Get in touch!

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Spotlight on a Successful Social Enterprise: Equal Exchange


From the Equal Exchange YouTube channel

Financial Success and Core Values
One of my favorite examples of an organization that has been able to raise millions of dollars of capital while staying in control and true to its values is Equal Exchange.

Despite posting enviable growth, this company has successfully retained its mission to create mutually beneficial relationships between farmers and consumers and support worker democracy and fair trade throughout the world.

Try some of Equal Exchange’s teas, coffees, chocolates, and fruit. You’ll be hard pressed to find goods of this quality anywhere else, and you’ll feel awesome that what you’re consuming is good for you and good for the world.

So what’s their secret?
How has Equal Exchange been able to grow and thrive for over 25 years while maintaining its mission and values?

Equal Exchange stipulates from the outset that investors have no voting rights. Investors are sufficiently confident in the worker-owners of the company to steward its resources. And investors have never been disappointed – they have received generous dividends every year, resulting in a return that exceeds a comparable investment in the S&P 500.

Notably, Equal Exchange’s structure prevents any investor or owner from profiting from the sale of the company.

Equal Exchange’s structure and investor agreements ensure that only values-aligned investors will be interested. The controls placed shareholder participation have never proven a hurdle to gaining investment. Demand exceeds supply every time. Equal Exchange offers its preferred stock.

Values-Driven Business
Equal Exchange is not successful in spite of its commitment to its mission but because of it. A majority of investors and consumers want to do business with values-driven companies and Equal Exchange meets that demand.

There is plenty of room for more companies to do the same!

Interested in learning more? Get in touch!

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