Last week, the U.S. House of Representatives passed a crowdfunding bill that will allow startups to offer and sell securities via crowdfunding sites and social networks. If passed by the Senate and signed off on by the President, the bill will become a law, giving entrepreneurs new options for raising money for their companies. Here’s a look at the current and proposed crowdfunding rules, and how this bill could shake things up for startups. What is crowdfuding? As the term suggests, crowdfunding is funding from a crowd of people; that is, many people provide small amounts of money to financ
. . . → Read More: What the new U.S. crowdfunding bill means for entrepreneurs
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Traditionally when businesses expand they fund growth by offering company stock or pledging assets to secure debt. As the public offering and lending markets have pulled back in the current economy we see more business expansion funded through venture capital and angel investor groups. With angels moving up the funding hierarchy and leaving a gap with only friends-and-family as the next funding option for entrepreneurs, there is an interesting legislative initiative proposed to fill this gap with federally authorized crowd funding. Crowd funding has not been recognized as a legal w It’s really easy to find information about raising money from angel investors or VCs, but many people don’t think about another important way to fund your startup: raising money from family and friends. I’ve raised money from friends and family twice and want to share what I’ve learned so that you can raise money from your friends and family and still be able to attend your family reunions. Raising money from friends and family can be easier and less complicated than raising money from professional investors, but is not without drawbacks. There are certainly pros and cons to raising money fro Today, I’m talking with David Rose, who founded AngelSoft, now , in 2004. Gust provides a platform where angel investors and entrepreneurs can connect and discuss ventures. Originally created with angel investors’ needs in mind, Gust now has more than 750 investment organizations worldwide using its platform to manage deal flow and other day-to-day tasks. Over 125,000 startups have, through Gust, worked with more than 35,000 individual investors on their ventures. The company is based in New York City, has a development office in Vancouver, British Columbia, Canada, and a European office in Pa Washington, D.C. (Press Release – September 15, 2011) – Small Business & Entrepreneurship Council (SBE Council) member and entrepreneur Sherwood “Woodie” Neiss brings his Crowd Fund Investing (CFI) framework to a congressional hearing today, where there is growing support to modernize outdated security laws that prevent small business owners from tapping into their networks for raising capital. Today, the U.S. House Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs is hosting “Crowdfunding: Connecting Investors and Job Creators” where they will hear from Nei Streetline Inc. has been selling its parking-sensor technology for only a year and it has just 30 employees, but International Business Machines Corp. is depending on it and hundreds of young start-ups like it to reach ambitious financial targets. A parking-guide application from Streetline, one of several young start-ups leveraging relationships with IBM. By 2015, IBM expects to add about $30 billion to its 2010 revenue of $99.9 billion, a challenging goal considering it grew its annual sales by around $10 billion over the past decade. To get there it is relying on relationships with ventu Q: Say I have an angel (SEC accredited) who’s ready to invest at an amount well below $100k. How would this impact on a future round with VCs? Is there some standard or average pre-money and post-money that happens in angel deals? Also, the angel in question is a family member of a friend, so would it be better to have them invest as a family/friend financier rather than an angel, and how exactly would that work? A: (Brad) Let me address the last question first. There is no real difference between a “family/friend” investor and an “angel” investor other than semantics. Structurally…. Similar topics at:  Family and Friends, Selling Stock -- SEC Rules, Valuation  accredited investor, sec Editor’s Note: This guest post is a three-part series on angel investing. Part I introduces angels and angel groups, Part II focuses on the due diligence process and the post-investment relationship, and Part III breaks down angel investing for entrepreneurs. Angel investors, or angels, are usually wealthy individuals and “accredited investors” who provide capital for startup companies in exchange for convertible debt or, usually, an equity stake in the company. Angels are investing “mad money” that doesn’t change their lifestyle if spent and tend to make their own investment decisions, unlike Many entrepreneurs turn to friends and family for their first funding needs. In fact, it is common for non-tech startups to raise all the capital they need from friends and family. I don’t know for sure, but I would suspect that friends and family make up the largest source of funding for entrepreneurs and startups. Friends and family financing is popular because it is easy to get a hearing from the people who know you best and they are positively inclined to say yes. But there are some negatives as well. It’s tough to know how to price and structure an investment where the investors are clos Not all VC firms are the same. Fund size, fund tenure (how far into the current fund is the firm?), firm’s track record, partner’s areas of interest |
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