What if I told you the only thing standing in the way of large-scale prosocial economic development was you?

What if I told you the only thing standing in the way of large-scale prosocial economic development was you?

Few people know about the potential of Investment Crowdfunding to save the middle class and bring back the unique character and charm of our individual states, cities, and towns.

Investment Crowdfunding is a newer tool that allows the American people to fund the innovations and enterprises they want to see in their communities and in the world.

Crowdsourcing itself is not new. Virtually every society has developed some type of crowd sourced solution to economic scarcity, such as micro-lending groups and cooperative business practices. But prior to a national model like Regulation Crowdfunding, it was difficult to have broad coverage of high impact solutions.

Today, we want to begin in earnest the discussion about the use of Investment Crowdfunding in our states, cities, and towns to bring about enterprise solutions and job creation from within those places. We are talking big. We are talking about a path to save the middle class on our own, community by community, without interference from Washington or Wall Street.

Our case study will be the newly launched Crowdfund Montana platform and the Pacific Northwest Rural Broadband Alliance (PNWRBA) offering.

Montana is known for many things: breathtaking vistas, a rugged can-do spirit, and really terrible internet service.

PNWRBA is a company that was co-founded by a native Montanan, Elvis Nuno, who returned home after receiving an education and professional experience in the telecom and wireless ISP industry. Elvis has specialization in network engineering, automation, and cloud engineering, and together with co-founders Kevin Mesiab and Jacob Dobie, is on a mission to bring affordable and reliable internet service to Montana and other rural states.

To kick things off, there will be an online launch of Crowdfund Montana and the PNWRBA offering on Wednesday, October 20th from 12 – 1 PM Mountain Time. Please join us for a discussion about taking our economic health in our own hands and a lively Q&A session. Click here to register.

 

Next, the Angels of Main Street Due Diligence Learning Cohort featuring Pacific Northwest Rural Broadband Alliance will be held on Mondays at 5 PM Pacific Time/8 PM Eastern Time starting Monday, November 1st to Monday, December 6th. Angels of Main Street Community Manager Amy Short, a successfully exited entrepreneur and investor, will host a series of interactive discussion sessions designed to take the mystery out of direct investing. This group learning opportunity will flow as follows, based on a 5-6 week schedule with one Zoom-based 90 minute meeting per week. Changes to the schedule will be made when necessary to suit the emergent nature of the group learning experience:

Week 1: Introductions: topic of due diligence, principles, methods, and introductions among members of the group

Week 2: Review of offering: Group goes through the offering together. All documents are available online at https://crowdfundmontana.com/campaigns/uqipv02

Week 3: Review of offering: Issuer (Pacific Northwest Rural Broadband Alliance) goes through the terms of the offering with the group and answers questions

Week 4: Review of offering: Securities lawyer and CEO of Crowdfund MainStreet, Michelle Thimesch, goes through the offering documents with the group and answers questions

Week 5: Group suggests further questions for issuer, and if ready, group wrap-up

Week 6: Additional answers to questions and group wrap up, if desired

There is no obligation to invest and the conversation is open to EVERYONE! Come join us and get inspired to direct your hard earned savings into the prosocial solutions you long for. Contact amy@jennykassan.com to join this inclusive learning cohort.

Closing the gaps in the regenerative investment ecosystem

Closing the gaps in the regenerative investment ecosystem

My colleagues and I are on a mission to create a robust infrastructure and ecosystem that will make regenerative community investing easy, seamless, accessible to all, and fun!

To this end, we have put many pieces in place: legal/coaching services (Jenny Kassan Consulting), a community investment platform (Crowdfund Mainstreet), and an investor community open to all (Angels of Main Street). We are always asking ourselves what else we can do to support the movement for community investing.

One big missing piece is welcoming and inclusive physical locations where entrepreneurs, investors, and allies can come together to connect and build trust. In the last year and a half, we have all come to appreciate in-person gatherings. The human species was not designed to connect via video camera! Yet coming together in person continues to be challenging, especially for small businesses whose livelihoods depend on being able to meet customers face to face.

Michelle Thimesch and I have launched an investment fund called Opportunity Main Street with the mission to lift up and sustain overlooked entrepreneurs and the investors who want to support them by providing a physical location where they can meet and share resources. We are thrilled to announce our first investment—Charm City Inn, a beautiful building in Baltimore, MD.

The building will be a hub for community investing—a place where entrepreneurs can connect with local investors, sell their products in a cooperative retail space, and produce products in a commercial kitchen. It also includes short term residential units and a pub/eatery in the basement.

By providing affordable cooperative space for entrepreneurs with shared resources like a point-of-sale system, shared staffing, and meeting space, we can help them ease back into community-facing businesses without having to bear all the risk and expense.

Opportunity Main Street is offering the opportunity to invest in this project through secured promissory notes at 7% interest and preferred equity with a projected 12-15% IRR. This offering is only open to accredited investors. The last day to invest is September 28.

Please email Michelle@OpportunityMainStreet.com for details!

When it Comes to Investment Crowdfunding—Compliance Matters!

When it Comes to Investment Crowdfunding—Compliance Matters!

What to Know Before You Take the Plunge

The investment crowdfunding marketplace is growing faster than ever before, and is projected to grow by $196.36 billion from 2021 to 2025.

Unfortunately, industry watchers have observed an alarming level of non-compliance with the most basic rules of Regulation Crowdfunding by both companies raising capital and the platforms hosting the campaigns.

Non-compliance can result in regulatory enforcement action and/or investor lawsuits.  So if you’re considering dipping a toe into the crowdfunding world, compliance should be at the top of your list.

In 2016, the SEC completed its rulemaking process for Regulation Crowdfunding.  It suddenly became possible for a business to list an investment offering on a platform, and anyone in the United States could invest in the offering.  But before doing that, the business, as well as the platform, must comply with some basic rules of the road.

According to a recent analysis, only a small minority of offerings listed on Regulation Crowdfunding platforms are compliant!  

 

Crowdfunding compliance—what to watch for 

To offer securities under Regulation Crowdfunding, you must complete a federal Form C (also known as the offering statement).  The form takes about 60+ hours to properly complete and is designed to provide all the information investors need before deciding whether to invest.  Without this documentation, investors would essentially be going in blind.

A properly prepared Form C protects the business that is raising funds from future lawsuits from investors who claim they did not receive the information that was supposed to be disclosed.

In addition to the Form C, there are requirements for additional reports after you complete your raise.

Failure to comply with these requirements can result in private litigation—all of the investors in a non-compliant offering are entitled, at a minimum, to rescission.  In a rescission, the company must return the proceeds of the investment to the investor and pay interest.  The company may also be subject to enforcement actions by federal and state regulators.

If you fail to comply with all of the regulations, you create a potential liability for your company which would have to be disclosed to all future potential investors.

The effort of making sure you are compliant on the front end is well worth avoiding the potential nightmare scenarios if you don’t!

 

What to expect from a regulation crowdfunding platform

With compliance top of mind, it’s essential to seriously examine the level of compliance and transparency your platform of choice is practicing. 

At a minimum, here are a few helpful questions any investor or entrepreneur should ask before choosing a crowdfunding platform:

  1. What efforts are they taking to meet the regulatory requirements?
  2. Do they prepare the Form C for the companies that list on their platform?  If so, what is the training of the person that prepares it (is that person a lawyer)?
  3. If the platform prepares your Form C and it is found to be deficient, does the platform cover the resulting litigation and other expenses?

Compliance isn’t optional—it’s a must

As investment crowdfunding continues to grow, so do the concerns surrounding regulation and compliance and the likelihood that private lawsuits and public enforcement actions will become commonplace.

If you’re interested in connecting with one of our team members to discuss how we can support you with planning and implementing a compliant fundraising campaign, complete our Interest Form.

Three Keys to Escape the Bootstrap Trap

Three Keys to Escape the Bootstrap Trap

You may have been bootstrapping for a while now—using your personal resources to fund your business and hoping that eventually you will be able to break even and start paying yourself and buying the things your business really needs. 

The symptoms of being in the bootstrap trap include:

  • using personal credit cards to pay for business expenses
  • doing side gigs to earn extra money
  • wearing all the hats in your business because you can’t afford to get high-quality help
  • not being able to provide a top-quality customer experience due to lack of funding
  • not paying yourself a salary anywhere close to what a CEO should earn

Going for too long with too few resources is a leading cause of business failure. So how do you finally get off the hamster wheel of bootstrapping?  Here are the keys to get on the right path:

Realistically evaluate your options and commit to the best one for you.  

If you are in the bootstrap trap, you have three options:

1) Continue as you are and keep hoping that you finally get enough revenues to be able to do all the things you want with your business. This can work for some—if you hustle hard enough you may be able to reach that revenue goal. But if you have been trying to reach that goal for a while and you keep falling behind, it is time to acknowledge that a lack of resources is making it impossible for you to create sustainable revenue. You are in a vicious cycle!  Without upfront resources, you can’t buy what you need to create a business that generates sustainable revenue.

2) Give up on your business and get a job.

3) Bring outside resources into your business—also known as Other People’s Money (OPM). I want to be very clear about what OPM is. It is not money that you are personally liable to pay back (like a credit card, home equity line of credit, or personal loan from a family member). That kind of money keeps you in the bootstrap trap. OPM is money that is invested in your business and does not put your personal finances at risk.

If you choose option 3, you owe it to yourself to commit and do what it takes to get that funding!

If you choose to raise funding for your business, learn about all the options for doing that.

There are numerous ways to bring in outside funding for your business.  It is not necessary to be a high growth tech startup to raise funding from investors.  Be sure you understand all the options so you can choose the one that fits your business best.

Create your plan.

Spending some time up front to create a well thought out plan will save you time, effort, and regrets on your fundraising journey.  You need to customize your plan to your particular goals, projections, and values so that you don’t waste time chasing funding sources that are not a good fit for you or, even worse, get funding that requires you to sacrifice what you love the most about your business.

We want to help you get clarity on your path for escaping the bootstrap trap.  We are offering a limited number of sessions with our team members who can help you pinpoint your strategy.  To schedule a complimentary session, click here.

What could possibly go wrong? Using due diligence to make investment decisions

What could possibly go wrong? Using due diligence to make investment decisions

Due diligence, a fancy term for doing reasonable research, is a key component in the process of evaluating any investment opportunity. While there are no set rules for the due diligence process, due diligence is expected to be conducted by investors and can be a wonderful learning experience. It’s common practice for due diligence to include review of issuers’

  • Management Team
  • Financial Projections
  • Product / Service / Technology
  • Market Opportunity
  • Go-to-Market Strategy
  • Competitive Analysis

Although issuers expect potential investors to perform due diligence, the degree to which an issuer is prepared and organized enough to facilitate the process varies widely. Entrepreneurs who are launching or managing businesses and raising money simultaneously are often spread thin with little time to spare. Lucky for investors considering investments through a FINRA approved portal for Regulation Crowdfunding (Reg CF), much of the document collection and anti-fraud verification is already complete!

Among the many benefits of Reg CF raises is the transparency and ease of access to the issuer’s business documents. FINRA approved Reg CF portals like Crowdfund Mainstreet collect the issuer’s pitch deck, executive summary, financial documents, legal documents, term sheet, and projected use of proceeds and post them on the crowdfunding page along with a link to Form C —the Securities and Exchange Commission’s (SEC’s) required disclosure form.  These can all be easily reviewed at any time during the raise. 

Some investors take what is colloquially called the “spray and pray” approach to investing.

What’s more, the SEC relies on Reg CF portals to shoulder anti-fraud responsibilities in the form of background checks and securities enforcement regulatory history checks for each issuer and its officers, directors, and owners of 20% or more of the voting equity in the company. Because the portals have already done the work of document collection and background checks, potential investors in Reg CF raises have a head start in the due diligence process and are able to save time and effort. 

Because Reg CF raises have relatively low minimum investment thresholds, combined with the required checks by the portal, some investors take what is colloquially called the “spray and pray” approach to investing. They make many investments across various opportunities without performing due diligence and hope their investments that have returns do well enough to cover the losses of the other investments and, on the average, they come out on top. While the spray and pray approach is common, I recommend a more empowered approach: performing due diligence to at least a degree that reflects the risk and, even better, teaming up with friends to conduct due diligence together. Not only will you be able to share the workload, everyone will benefit from the diverse perspectives offered by various members of the team.

As the Community Manager for Angels of Main Street, I’ll be coordinating a due diligence team for Traipse: My Local Token, an issuer currently raising funds on the Crowdfund Mainstreet portal. Everyone is welcome to join regardless of interest level in this specific issuer. Everyone has something to offer and due diligence is a team sport.  Contact Amy@JennyKassan.com to be notified of upcoming meetings.  Note:  You do not need to be an Angels of Main Street member to join this due diligence group.

The Angel Capital Association 2021 Summit—is there any hope?

The Angel Capital Association 2021 Summit—is there any hope?

 

Have you ever attended a conference and felt so at home—like the attendees are really your people?  When I go to the Angel Capital Association conference, I feel exactly the opposite!  Most of the people I meet there don’t understand why anyone would be concerned about the impact of their investments beyond the impact of making the angel investors rich.  Most of the talk is bragging about that 47x exit that they got (i.e. they got a return of 47 times their original investment).  

I went ahead and applied to speak at the conference about “alternative” investment models because it is my mission to spread the word about non-extractive, sustainable ways to invest.  I was shocked when my proposal was accepted!  I decided not only to attend the panel I was on, but to attend the whole conference and try to keep an open mind.  Maybe the world of angel investing was starting to evolve?

When I looked at the agenda, I noticed that almost 20% of the sessions had the word “exit” in the title.  This, and the content of most of the sessions, confirmed that most active angel investors continue to rely on “exits” (via acquisition or IPO) to get paid.

The session I was invited to speak at was called “The Art of the Deal: Alternative Deal Structures.”  I decided to be honest about my opinion of the sacred cows of angel investing. 

Here are some excerpts of what I said:

“When we talk to angel investors about ‘alternative structures,’ there is an assumption that alternative structures are debt and that equity has to be structured using the typical angel/VC style term sheet. . .There are many ways to structure equity.”

“I wonder about the wisdom of relying on a big exit as the only way to get paid.”

“The model where you push for an exit is not appropriate for 99.9% of businesses in our country.  And that doesn’t mean those businesses are “lifestyle businesses” or not investable.  They could go huge.  Only 6% of fortune 500 are venture backed.”

“Women are less likely to found companies that are on the high growth path.  If you want to diversify your portfolio, focusing on that one structure may not be consistent with that.”

As you can imagine, my comments did not go over well.  Here is what some of the attendees said:  

“We need to keep deal structures pretty standard, especially if future institutional funding is expected.  Using the standard terms on the National Venture Capital Association’s website has been very helpful.”

“I believe the great majority of angel investors want to help grow companies to a successful exit.”

“Most angel investors want to invest in companies that will have an exit.”

“In MOST cases exit is the right path.”

“A lot of complex “creative” deal structures don’t really help . . . the reason the VC route happens over and over is because so many lawyers have a basic understanding.”

“I would argue that if the entrepreneur doesn’t want to drive to an exit, we shouldn’t have invested in the business in the first place.”

 

We did get a few supportive comments acknowledging that there is, in fact, a category of business that can be successful and grow big without having an exit.  Unfortunately, this seemed to be very much a minority view among the attendees of the conference.  My hope is that I might have planted some seeds that will bear fruit some day as more investors become increasingly open minded about investment structures that support a livable, prosperous, and sustainable world for all.