Mini Bootcamp: Get ready for Crowdfunding
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Crowdfunding requires Planning and Preparation - Get started now! Tip and tricks to help with Equity Crowdfunding.
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Mini Bootcamp: Get ready for Crowdfunding
- 1. MINI BOOTCAMP: GET READY FOR CROWDFUNDING 10 STEPS Mary Juetten, Founder & CEO Crowdfunding Global Bootcamp & Convention October 15, 2013 "TRAKLIGHT", "ID YOUR IP", "IP VAULT", and "IP CLOUD" are registered trademarks of The PIP Vault, LLC. © MMXIII The PIP Vault, LLC. All Rights Reserved.
- 2. Start on the Right Trak Do NOT start with creating a: Campaign Pitch or Business Plan THIS APPLIES TO ALL FINANCING! Disclaimer: This is intended to be general information. Nothing in this presentation constitutes legal advice. Please consult with an attorney before making any intellectual property protection decisions.
- 3. GET READY NOW Equity is not yet Legal (Title III) Create a Pipeline Same steps as other Financing Sources
- 4. 10 Requirements 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Registration & Incorporation in US Names – Directors, Officers, >20% SH Business Description & BUSINESS PLAN Prior years Tax Returns Financial Statements Use of Proceeds Offering Details & Progress Updates Share price & methodology (VALUATION) Ownership & capital Capital (existing, offering & differences)
- 5. EQUITY is not Easy Tough requirements include: Business Plans Financial Statements Valuation
- 8. Business Plan & Pitch IDENTIFY IP PROTECT IP PICK A PLATFORM BUILD SOCIAL CAPITAL CREATE A PITCH
- 9. Got Intellectual Property? Why Care… • IP theft costs US companies $250 billion annually • 100% of all companies have IP • 700K new startups annually vs. 20% protected IP after 1st year • IP is most valuable asset and not on your Balance Sheet • Exclude competition; Attract investment (incl. crowdfunding); Leverage & license • Avoid IP loss, infringement, or business failure Disclaimer: This is intended to be general information. Nothing in this presentation constitutes legal advice. Please consult with an attorney before making any intellectual property protection decisions.
- 10. What is IP? • • • • Patents (utility & design) Copyright © Trademark/Service mark TM SM ® Trade secrets – unsung heroes NO legal advice provided!
- 11. IP Misconceptions • IP is just for Tech Startups or Tech companies & Patents are the only IP for inventors • Trade secrets are the easiest to protect because there is no registration. • You can copy anything without a copyright © • You can copyright an idea. • Domain = TM • If I pay for it, I own it. • Patents means right to make or sell
- 12. Strategies: ID & Protect IP ✔ WHY WHO WHAT WHEN WHERE
- 13. WHO: IP Ownership Challenges • Multiple Inventors • Who you are? Employee of another company • Proper Assignment of IP Rights – personal versus company • Assume that Ownership automatically extends outside the US
- 14. WHEN: Key Dates to Remember • Date of Idea/Invention (First to Invent First INVENTOR to file) • Date of Use • Date of Filing • Date of Conversion • Renewals
- 15. WHAT: Business Plan/Funding Presentation • • • • • • Idea URL Name Know how Employees Contractors
- 16. Strategies to Protect IP • Do it Yourself: – USPTO.gov – Copyright.gov • Hire a Professional: – Attorney, Consultant, Legal Zoom, Rocket Lawyer • Secrets: – Notary, IP Vault, Copyright software
- 17. PICK A PLATFORM • REWARDS BASED: Kickstarter, Indiegogo, Rocket Hub How it works online! • EQUITY BASED: Not yet legal Online Business Planning Required • OTHER: Angel List, Lending Club, Georgia CF
- 18. REWARDS CHOOSE THE BEST PLATFORM FOR YOU: • ALL OR NOTHING • % BASED ON TYPE • BE REALISTIC
- 19. STEP 4: RAISE SOCIAL CAPTIAL Success is directly related to Social Capital Social Capital is more than Social Media Quality not Quantity
- 20. CONTENT IS KING Expert Blogs Speaking Social Media PR Start working on this before you launch your campaign.
- 21. Case Study: Lessons Learned
- 22. What they do. • Genetic Art – Ts – Portraits • Channels – Obsessed pet owner – Animal organizations
- 24. Seriously?... Try again? • • • • Lessons learned New plan of action New cause New business opportunity
- 25. The new plan. • Pre-Selling • HEAVY PR – Social Presence – Local media • • • • Partnering Get it in writing New rewards structure SCHEDULE
- 26. UPDATE
- 27. STEP 5: CREATE PITCH ONLINE ` Campaign Business Plan Projections
- 28. Ignorance is NOT a Defense Be Careful: Video Copy Business Plans
- 29. READ READ READ Read License & Permission to Use Check out Creative Commons
- 30. FINANCIAL Statements < $100K – CEO > $100K to < $500K Review > $500K = AUDIT by ?????? Tax Returns Capital structure Ownership info
- 31. Devil in the Details $XM Valuation/ $X per share price/ Total $XK Spend: $XK Now $XK Next $XK Then MAKE $XK $XK $XK SELL $YK $YK $YK OPERATE $ZK $ZK $ZK
- 32. Valuation Issues Recent Venture beat article: Employee Stock Options Key Performance Indicators (KPIs)
- 33. 10 Requirements 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Registration & Incorporation in US Names – Directors, Officers, >20% SH Business Description & BUSINESS PLAN Prior years Tax Returns Financial Statements Use of Proceeds Offering Details & Progress Updates Share price & methodology (VALUATION) Ownership & capital Capital (existing, offering & differences)
- 34. RESOURCES • CfPA, CfIRA • Crowdfundingroadmap.com Annual Oct 14th – 16th Convention & Bootcamp • Crowdfundcast.com – podcast • Getting Started with Crowdfunding Investing for Dummies in a Day • Crowfunding Hatchery • Traklight.com/IP Cloud – free resources & paid coaching • Crowdbuilder by Leverage PR- in-depth publicity instruction, task and milestone management, to integrated calendars and media lists
- 35. Additional Help • • • • • • • Incubators & Accelerators Mentors SBDC SCORE Startup America Competitions Angel Lists • Resources: TRAKLIGHT IP CLOUD
- 36. Questions? IDENTIFY. PROTECT. SUCCEED. www.traklight.com Visit our home page and take RISK QUIZ Mary Juetten mejuetten@traklight.com @traklight
Editor's Notes
- Microventures, CircleupSoMoLend is debtAngel List – accredited investors
- Registration & Incorporation in the U.S.Name, legal status, address, website, etc.2. Names of directors, officers, and 20%stockholders3. A description of the business and theanticipated business plan of the issuer4. Prior year tax returns5. Financial statements6. Description of intended use of raisedcapital & proceeds7. Target offering amount, deadline, andregular progress updates through the lifeof the offering8. Share price and methodology fordetermining the price9. Description of the ownership and capitalstructure of the issuer, including a lot ofdetail about the terms of the securitiesbeing sold10. Terms of any other outstanding securitiesof the company, including a summary
- Not all the requirements but not to be done over night.
- Kaufman study – not a lot of primary research on IPIP Loss – customer list stolen, create a brand and materials but infringing, and computer code not belonging to youIt is not just legal, it is good business. Not just IP attorneys but business attorneys. TI makes more from licensing than products, 40% of US companies’ value does not appear on BS (50% in the EU)
- Car – represents Patents – think how many different patents are in a car.Coke – design of the bottleWebsite copyrightTrademark – Coke – protect from Brand confusion – l bought the wrong cookies! Looked it up Fig Newtons 1914ish and Newmans 1997 – hmmmmmm.Coke is $100 billion dollar brand and only $40 billion on the balance sheet…
- Example of startup – to show that actually patents least amount of the time - NAME, BRAND, BLOG, Customer or Supplier List, and then Invention or Product – has 100% IP. Patents are more rare for startups! Trade secrets – cheapest but can be easiest to lose.If you patented the wheel (which I found out recently is not the actual tire) if you did not have the right to make a tie rod Example of focus on IP patents, miss the boat on the others, some simple things like protecting Trade Secrets with employees.1 – Simply does not. Only protected in the US. And also actions within the US can impact outside - example patents – until March 2013 changes, once you file in US, you have disclosed your invention and kills ability for international patents. Also, if you publicly disclose your invention with enough detail, you have also killed your ability for international patents 2 – simple ex. copyright – when many parties are doing a project – like these slides to more complex & problematic – patents – if more than one person listed on a patent as owner – regardless of contribution – EACH owner has the right to independently exploit the patent WITHOUT consulting the other.Example of a person who goes to a university and gets one idea from a professor and puts into patent – are they required to list that person as an inventor? 3 – who is actual owner of the IP – if individual inventor or person who filed, need to have a formal written assignment to the Company to assign all the rights otherwise…. 4 – May have a patented process but if an exclusive license to use or sell has been executed, then important to disclose and to understand how/if that impacts your ability to attract investors. 5. For example if you have a contractor developing software for you and they in turn use some freeware and you are charging for the software. You pay the invoice for the contractor and you think that you own this new software. Issues – copyright infringement because free ware used and then resold; if you have not expressly outlined who owns the IP in the software in your contract, you may have not retained the rights to the software. Contractors are not same as employees.
- Approach is methodical, like a checklist
- Multiple inventors have the right
- First INVENTOR to FILE and can Disclose and File.
- Knowledge is PowerGet informed and you will save time and money.ABSOLUTELY get attorneys or consultants.
- Pebble Watch campaign was an outlier
- Quality not quantify
- DNA Zoo Tees. Funding used to fulfill orders and “ramp up production”
- Insert the screen shot of the successful Campaign.
- Ask Audience what IP for each Case.Maria’s restaurant example - Have the name, working on the signage and everything, do not use yet but want to save money and wait to file until in use (means offered for sale) BUT someone else files – they win – explain Common Law TM but you do not have because not offered (explain Breanna’s pool concept – know your rights). Trade secrets need to be protected – process or recipes – have employees sign off and mention trade secrets specifically – also trade secret is different every state but need to take reasonable steps to protect something of value.Inventor – Phillip with Smart Focus, the need to document in proper inventors’ notebook and file patents but WAIT you infringed on a TM, any funding presentation, competition (crowdfunding will end up with a huge issue because Enabling Public Disclosure – all 3 are needed. Make sure all inventors’ listed – remember that if listed do NOT have to consult with you. Example from PGCC where the first guy said he did not have IP protection and was there seeking help and the second guy left an important piece at home.Website – copyright every 3 months for blog, careful re copyright taking others’ photos – just because no C does not mean that not still copyright issue. Also if you have videos done, make sure you have the copyright.Software created by outsiders – if they violate copyright and put into your code, can be a problem if not shown (open source read the T&Cs regardless). Need to have all IP assigned. Have business attorney check documents.DO NOT FORGET ABOUT managing IP – need to look for dates, renewals, maintenance fees etc.
- Infringement is real issues
- Microventures, CircleupSoMoLend is debtAngel List – accredited investors
- Reg D being filed on $500 Class B preferential unit with 5% 50 cents per unitTEAM PRODUCTS SYSTEMSCUSTOMERS CHANNELS IP NETWORK CONTRACTS CULTURECONTENT BRAND REACHStarting point for ValuationHave you outlined an exit strategy? If it's an M&A, do you have any companies in mind as acquisition targets?We have a strategy that will involve working with an intermediary to exit in 3 to 5 years and may involve selling either the DIY or the Enterprise separately or the whole company. We have some ideas for either strategic or equity buyers but have an understanding that often there are international buyers that we may not even be aware of and that is why we plan on consulting with a professional. Some targets include: Legal Zoom, Go Daddy, Thomson Reuters, Box, Dell, Google, Microsoft, and equity firms. - Do you know what the P/E, or multiple, is for similar companies in your space? The P/E is 8 to 26 based on EBDITA for similar businesses (discounted from 10 to over 30 for private v. public companies). This research was done by Software Equity Group (SEG). Business Intellegence/Risk and Security Solutions (which is the Traklight category) are rated near the top of the scale in Enterprise Value multiples when M&A is concerned. - How set-in-stone is the $5m pre money?We are prepared to discuss the $5m valuation as a starting point. We have done extensive research and analysis and will be happy to discuss at the meeting. Past first revenue, partners stream some exclusive took over 18 months to build. APIs, gameficationTrade secret approach to create lean products especially in secure storage area.Experienced Team – National & International NetworkSaaS and Enterprise Products - Validated proven patent pending SaaS technologyNational and International channel partnersSigned contracts for > $100K per annumTrade secrets & know how - products appeal to entrepreneurs and small companiesSystems to Scale plus Business Development Network – invested in Hubspot for inbound marketing, customer UI, landing pages and Infusionsoft for CRM. GT dashboard to manage and scale.Content developed – blog, white papers, videos, ebook, gameExpand development of enterprise tools by fulltime and additional resources, refactor DIY to be API and gamefication MILESTONE Q1 Company ID your IP; Q2 2014 beta Enterprise toolsSmarketing – channel for attorneys (S1 million); partnershipsSmarketing costs – building a sales and marketing team based on using Hubspot for frontend SEO and Infusionsoft for campaigns and backend CRM. Dan Tyre active in advising how to build this team.Working capital – was self funded and bootstrapped, but to scale and take to the next level, need capital.$15K per month development; 10K burn in addition on salaries, $5K SGA burn so $15K per month W/C covered partially IFS and other revenue. We are seeking a $200K loan from AIAF and of course applying to the ACA Innovation Challenge. (SOLID PLAN)The "SEG" below stands for the Software Equity Group which is the company that produces the analyist reports. They have formulated the overall index. From the first slide below, the median index EV(Enterprise Value)/EBITDA is 31.5.Second slide shows that the multiples are dropping.Third slide shows it ranging from a high in the hundreds to a low of just below 10 with most being in the high teens or 20s to 30s and beyond. From this I would say the lower boundary would be 10 and could easily go higher especially becuase Security SAAS and Business Intelligence is yielding higher EV during recent M&A activity.
- When it comes to reward-based crowdfunding, while these don’t establish an equity price which can be considered a direct comparable, they serve a very important role in market validation of the execution and scalability of the business model. Price points, customer traction, sales funnel, order fulfillment, and other critical information can be gleaned from a rewards-based campaign and incorporated in the next iteration of the product, or serve as validation of key business model assumptions.Since many valuations of pre-revenue startups rely on key performance indicators (KPI) and not on financial fundamentals, KPI validation is critical in building investor confidence and can indirectly impact valuations and funding(ESOP) where stock options are issued to early employees and investors with very low exercise prices, which are set to equal the price of common stock at the time the options are issued. The equity prices flowing through crowdfunding platforms will create a new set of early stage valuation comparables, data that have largely been missing from the public eye before. This can potentially have huge implications on the pricing of ESOP plans, particularly in the early stages.Read more at http://venturebeat.com/2013/10/08/crowdfunding-101-dont-forget-to-protect-your-idea/#SYYEMlRC8xvTg4s5.99Read more at http://venturebeat.com/2013/10/08/crowdfunding-101-dont-forget-to-protect-your-idea/#SYYEMlRC8xvTg4s5.99When it comes to reward-based crowdfunding, while these don’t establish an equity price which can be considered a direct comparable, they serve a very important role in market validation of the execution and scalability of the business model. Price points, customer traction, sales funnel, order fulfillment, and other critical information can be gleaned from a rewards-based campaign and incorporated in the next iteration of the product, or serve as validation of key business model assumptions.Since many valuations of pre-revenue startups rely on key performance indicators (KPI) and not on financial fundamentals, KPI validation is critical in building investor confidence and can indirectly impact valuations and funding.Read more at http://venturebeat.com/2013/10/08/crowdfunding-101-dont-forget-to-protect-your-idea/#SYYEMlRC8xvTg4s5.99
- Registration & Incorporation in the U.S.Name, legal status, address, website, etc.2. Names of directors, officers, and 20%stockholders3. A description of the business and theanticipated business plan of the issuer4. Prior year tax returns5. Financial statements6. Description of intended use of raisedcapital & proceeds7. Target offering amount, deadline, andregular progress updates through the lifeof the offering8. Share price and methodology fordetermining the price9. Description of the ownership and capitalstructure of the issuer, including a lot ofdetail about the terms of the securitiesbeing sold10. Terms of any other outstanding securitiesof the company, including a summary