Friday, June 29, 2012

What stands between Equity Crowdfunding and success?

Posted by Boaz Vinogradov 



To begin with, the SEC final guidelines complexity is an unknown. The SEC is tasked with implementing the law as well as protecting investors. If the requirements from Issuers (companies seeking money) will be cumbersome and expensive to produce and/or maintain, the number of applicants may be too small to deliver on the promise that Crowdfunding holds in financing the capital starved small business sector. Furthermore, delivering less than simple and easy to read and implement SEC guidelines will have the same deadening affect as complex, expensive and cumbersome guidelines. If an army of lawyers and CPAs will be needed to provide guidance to the small business owner, many Issuers will avoid the process. Crowdfunding will be both too expensive and too clouded for Issuers to get involved with.
However, even if straightforward guidelines for Crowdfunding from the SEC would require little upfront cash from Issuers, we are still left with plenty of risks. Pre revenue companies, startups and small business that seek Crowdfunding represent a risky group. The rate of success is lower than that of larger businesses. So the mix of seed and early stage venture growth capital will greatly determine the level of return to investors. Regardless of how noble the idea of Crowdfunding is, negative or low returns will greatly dilute the number of investors.

If the tens of thousands of technology startups that fail to attract Venture Capital (VC) and/or Angel investors enter the Crowdfunding space, we are less likely to see long term success for Crowdfunding. Unlike VCs, Crowdfunding investors are less likely to spread their risk over 20 to 30 investments. Why is concentrating on tech companies a concern? VC’s return on investment in recent years has fallen below that of Private Equity who typically invest in late stage, lower risk companies. Lower VC returns have led to a substantial shrinking of the US VC’s available capital, which makes one think, why do technology start-ups fail? Is it the inherently high level of difficulty starting a company, exacerbated by the need to develop new technology? Entrepreneurs often blame their VC investors with not supporting the company’s strategic direction and/or execution efforts. (For more on this subject see http://www.thefunded.com/).

CrowdfundingThe Funded dot com displays entrepreneur’s rankings of VC firms.  The highest score possible is 5.  One of the best known VC funds, Sequoia US, was rated 3.7 out of 5 by 102 entrepreneurs. KPCB, arguably the biggest name among VC’s was rated 3.1 by 42 entrepreneurs. Benchmark Capital was ranked 2.9 by 39 entrepreneurs. The scores are not very complimentary, leading one to believe tech company saturation in Crowdfunding will increase investment risk.

Through relationships with several CIP’s, Navocate has learned that over 50% of Issuers interested in Crowdfunding are revenue producing companies. Revenue companies are a lower risk than pre revenue companies. They have proven their ability to deliver a product or service and engage with customers, two major risks pre revenue companies still face. A higher percentage of Crowdfunded revenue producing companies will lower the risk and increase the likelihood of higher return to investors.

Crowdfunding Investment Portals (CIP’s) pose another risk factor based on how well they select Issuers. VC’s have had a long run and still subscribe to the one out of ten formula (with that one company producing very high returns).  Crowdfunding is not limited or focused on hi-tech risks, so the risk level is lower, yet the return on each issuer that meet success is low compared with the one out of ten that is successful in the tech space.

The CIP’s will be the gatekeeper of the Crowdfunding industry. They will go through a learning curve too. Some will specialize in certain industries, others will remain generalists, but all will improve their selection criteria and implementation process.

Will Issuers of Crowdfunding suffer the same fate of VC backed companies? Both have access to capital yet often still lack the management and execution support necessary to assure success.

How this will all come together remains to be seen.

Thursday, June 21, 2012

Webcast Attendance Indicates Business Owners’ Excitement Over Crowdfunding

Recently, Navocate business sales + acquisitions hosted a web seminar with strategic alliance partners EarlyShares and Crowdfunding Roadmap titled “Get Funded Through Crowdfunding.” The webinar was Navocate’s best-attended in the company’s history—both relative to the number of people who participated as well as the duration of the event. 
Entrepreneurs are about to receive a new and unprecedented capital funding opportunity as a result of Congress passing the Jumpstart Our Business Startups (JOBS) Act in April. The JOBS Act allows non-accredited investors to participate in Crowdfunding as of January 1st, 2013—allowing them to make equity investments in privately-held U.S. companies for the first time.
“Recognizing that the recently passed JOBS Act will drive monumental changes for both entrepreneurs and investors, this webinar was designed to help everyone understand what Crowdfunding is, how it works, and specifically what companies need to think about to get Crowdfunded,” said Karl F. Buhl, managing member of Navocate. 

During the webinar Paul Winkle (Navocate) reviewed the Act’s issuer guidelines as well as the June 8th Securities and Exchange Commission update. Ruth Hedges (CEO, Crowdfunding Roadmap) reviewed eligibility and reporting requirements, while Maurice Lopes (CEO, EarlyShares) discussed how to position a company to receive Crowdfunding capital. Karl Buhl (Navocate) reviewed Navocate’s valuation model for both revenue and pre-revenue companies, relative to the how the securities being offered can be valued, as required by the Act.

“The Q&A session lasted about 45-minutes—almost as long as the webinar itself—which demonstrates how hungry the audience was for this knowledge. More importantly, it reflects the intense need for relevant and transparent information about Crowdfunding throughout the market in general,” Mr. Buhl concluded.

Navocate hosts monthly webinars about business sales, acquisitions, valuation, private equity, and Crowdfunding for emerging companies with revenues between $3M - $30M, focusing on the under-served M&A segment that is above the business brokers’ and below investment banks. As part of this series, Navocate will continue to provide updates about Crowdfunding, how the regulations are evolving, as well as implications for both entrepreneur and investor as the January 1st start date approaches.

Click this link to view the Crowdfunding webinar

Click this link to be notified of future Navocate webinars.


Sunday, June 10, 2012

Navocate Offering Free Crowdfunding Preparedness Webinar


Entrepreneurs are about to receive a new and unprecedented funding opportunity—an opportunity that may ultimately determine the success of their business. I’m referring to the method of raising business capital through Crowdfunding. For small investors it could provide a great “level-the-playing-field” opportunity to get in on the ground floor of promising startups. Equity crowdfunding will allow entrepreneurs to sell unregistered shares  to all sorts of investors via registered funding portals or broker dealers. Companies will be restricted to selling no more than $1 million of stock per year, but to an unlimited number of generic investors. The JOBS Act opens true equity crowdfunding up to the masses and as such, there is expected to be a massive influx of entrepreneurs rushing to raise equity for their companies.
To help you understand equity Crowd-funding, and to navigate through the volumes of misinformation, we’ve assembled well-respected panelists from companies that are at the forefront of the recently- passed Crowdfunding law (part of the April, 2012 JOBS Act).
Navocate's goal is to provide you information and guidance on how Crowdfunding will open investment opportunities to non-accredited investors—establishing a new avenue for business capital.
Topics include:
  • An update on the latest Crowdfunding regulatory issues.
  • Eligibility and reporting requirements.
  • Advice on how to position your company to receive Crowdfunding capital.
  • How to value your company and set an appropriate share price.
  
Who Should Participate?
  • Entrepreneurs working on their start-up business plans.
  • Business owners of established companies—pre-revenue or profitable.

The Crowdfunding webcast is a funding preparedness guide for issuers, and is set to take place on June 12th at 1pm EDT.
Click this link to register now for “Get Funded Through Crowdfunding.” https://navocate.webex.com

About the Panelist Companies
Maurice Lopes, CEO of EarlyShares (Miami)—an equity-based Crowdfunding platform (Funding Portal) which provides early-stage companies and investors a secure, easy to use platform for raising and investing capital. www.earlyshares.com
Ruth Hedges, CEO of Funding Roadmap (Las Vegas)—offering the first online business plan & due diligence reporting software built on a cloud network. www.fundingroadmap.com
About Navocate
Navocate provides business sales and acquisitions services for emerging companies with revenues from $3M - $30M. We focus on the under-served market segment above business brokers and below investment banks.  www.navocate.com
Paul Winkle
(888) 900-5866, ext. 5
paul@navocate.com

Thursday, June 7, 2012

Navocate to launch Crowdfunding Valuation Model*: free webcast

Posted by Paul Winkle on Mon, Jun 04, 2012 @ 10:12 AM

Paul Winkle, crowdfundingCompanies wanting to access capital through equity crowdfunding are required to produce a third-party valuation of their business and provide a price for the securities offered as well as the method used for determining that price. Navocate Business Sales + Acquisitions is sponsoring a free webcast to discuss their Valuation Model developed exclusively for companies wanting to access capital through crowdfunding.

In order to crowdfund, a company (start-up, pre-revenue or revenue producing) must be incorporated. In addition, a Company (referred to as an “Issuer”) must disclose how the securities offered are being valued and provide examples of methods for how such securities may be valued in the future.

Navocate provides Crowdfund companies with an affordable business valuation and securities pricing report as mandated under Title III (Crowdfunding) of the JOBS Act. Navocate’s proprietary valuation model uses three methods to analyze both pre-revenue and income-producing companies:

1. Sell-Side (historic view) — Navocate analyzes your financial statements (or pro formas and forward-looking financials for pre-revenue companies) to understand your business’s performance relative to a database of over 650 industry sectors.

2. Buy-Side (future view) — Navocate next analyzes how a potential investor would evaluate your company relative to deal structure, cash flow, risks, and ROI.

3. Soft-Side — Finally, Navocate models soft parameters that can have exponential effects on your company’s success (either positive or negative), such as management structure, financial controls, market opportunity and growth rate, and overall risk factors.

The result: Navocate’s valuation and securities pricing report provides you with a thorough valuation of your business, our assessment of an appropriate stock price range, and an explanation of the methodologies and rationale behind the analysis—in an affordable, easy to read document.

The intent of the JOBS Act is to provide companies access to capital via crowdfunding to grow their business and create jobs. If you are an Issuer wanting to learn more about Crowdfunding, click this button to register now for “Get Funded Through Crowdfunding,” June 12th, 1 pm Eastern time:

Register Here

When asked ‘How did you hear about this webcast?’ during the registration process, please select ‘Paul Winkle’ in the drop-down menu.

*Crowdfunding was signed into Law April 5th, 2012 by President Obama. However, it will not be legal under the federal securities laws until the U.S. Securities and Exchange Commission (SEC) adopts rules to implement a new exemption that will allow crowdfunding. In addition, the SEC has latitude to prescribe additional rules and requirements.

Navocate provides Business Sales and Acquisitions services for Entrepreneurial Companies with revenues from $3M - $30M. Specifically, Navocate focuses on the market segment above business brokers, and below investment banks. For more information please visit www.navocate.com.

Tags: , ,

 

Navocate Offering Free Crowdfunding Preparedness Webinar for Issuers

Entrepreneurs are about to receive a new and unprecedented funding opportunity—an opportunity that may ultimately determine the success of their business. I’m referring to the method of raising business capital through Crowdfunding. For small investors it could provide a great “level-the-playing-field” opportunity to get in on the ground floor of promising startups. Equity crowdfunding will allow entrepreneurs to sell unregistered shares to all sorts of investors via registered funding portals or broker dealers. Companies will be restricted to selling no more than $1 million of stock per year, but to an unlimited number of generic investors. The JOBS Act opens true equity crowdfunding up to the masses and as such, there is expected to be a massive influx of entrepreneurs rushing to raise equity for their companies.



To help you understand equity Crowd-funding, and to navigate through the volumes of misinformation, we’ve assembled well-respected panelists from companies that are at the forefront of the recently- passed Crowdfunding law (part of the April, 2012 JOBS Act).



Navocate's goal is to provide you information and guidance on how Crowdfunding will open investment opportunities to non-accredited investors—establishing a new avenue for business capital.



Topics include:

• An update on the latest Crowdfunding regulatory issues.

• Eligibility and reporting requirements.

• Advice on how to position your company to receive Crowdfunding capital.

• How to value your company and set an appropriate share price.





Who Should Participate?

• Entrepreneurs working on their start-up business plans.

• Business owners of established companies—pre-revenue or profitable.



The Crowdfunding webcast is a funding preparedness guide for issuers, and is set to take place on June 12th at 1pm EDT.





Click this link to register now for “Get Funded Through Crowdfunding.” https://navocate.webex.com.





About the Panelist Companies



• Maurice Lopes, CEO of EarlyShares (Miami)—an equity-based Crowdfunding platform (Funding Portal) which provides early-stage companies and investors a secure, easy to use platform for raising and investing capital.



• Ruth Hedges, CEO of Funding Roadmap (Las Vegas)—offering the first online business plan & due diligence reporting software built on a cloud network



About Navocate



Navocate provides business sales and ac-quisitions services for emerging companies with revenues from $3M - $30M. We focus on the under-served market segment above business brokers and below investment banks.



Paul Winkle

(888) 900-5866, ext. 5

paul@navocate.com








Monday, June 4, 2012

Navocate to launch Crowdfunding Valuation Model*: free webcast

Posted by Paul Winkle on Mon, Jun 04, 2012 @ 10:12 AM

5
Share



Paul Winkle, crowdfundingCompanies wanting to access capital through equity crowdfunding are required to produce a third-party valuation of their business and provide a price for the securities offered as well as the method used for determining that price. Navocate Business Sales + Acquisitions is sponsoring a free webcast to discuss their Valuation Model developed exclusively for companies wanting to access capital through crowdfunding.

In order to crowdfund, a company (start-up, pre-revenue or revenue producing) must be incorporated. In addition, a Company (referred to as an “Issuer”) must disclose how the securities offered are being valued and provide examples of methods for how such securities may be valued in the future.

Navocate provides Crowdfund companies with an affordable business valuation and securities pricing report as mandated under Title III (Crowdfunding) of the JOBS Act. Navocate’s proprietary valuation model uses three methods to analyze both pre-revenue and income-producing companies:

1. Sell-Side (historic view) — Navocate analyzes your financial statements (or pro formas and forward-looking financials for pre-revenue companies) to understand your business’s performance relative to a database of over 650 industry sectors.

2. Buy-Side (future view) — Navocate next analyzes how a potential investor would evaluate your company relative to deal structure, cash flow, risks, and ROI.

3. Soft-Side — Finally, Navocate models soft parameters that can have exponential effects on your company’s success (either positive or negative), such as management structure, financial controls, market opportunity and growth rate, and overall risk factors.

The result: Navocate’s valuation and securities pricing report provides you with a thorough valuation of your business, our assessment of an appropriate stock price range, and an explanation of the methodologies and rationale behind the analysis—in an affordable, easy to read document.

The intent of the JOBS Act is to provide companies access to capital via crowdfunding to grow their business and create jobs. If you are an Issuer wanting to learn more about Crowdfunding, click this button to register now for “Get Funded Through Crowdfunding,” June 12th, 1 pm Eastern time:

Register

When asked ‘How did you hear about this webcast?’ during the registration process, please select ‘Paul Winkle’ in the drop-down menu.

*Crowdfunding was signed into Law April 5th, 2012 by President Obama. However, it will not be legal under the federal securities laws until the U.S. Securities and Exchange Commission (SEC) adopts rules to implement a new exemption that will allow crowdfunding. In addition, the SEC has latitude to prescribe additional rules and requirements.

Navocate provides Business Sales and Acquisitions services for Entrepreneurial Companies with revenues from $3M - $30M. Specifically, Navocate focuses on the market segment above business brokers, and below investment banks. For more information please visit www.navocate.com.

Tags: , ,