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11/15/2013 McKinsey & Co - Why crowdfunding appeals to the Middle East
12/30/2013 KQED Radio - Richard Swart - A How-To Guide to Crowdfunding 12/20/2013 Gulf Times - Silatech Hosts Seminar...

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5 Reasons This Small Country Could Win Big With Crowdfunding?

…and what country is it?

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  1. They have ‘Kasmoni’ a rotating savings and credit system for people who don’t have access to the banking system. (a kind of traditional crowdfunding) 

  2. This country experiences the same problem we see all over the world with a lack of access to funding for small businesses and start-ups – and they want to do something about it.

  3. There is strong ties to Holland, a country that is already using debt and equity crowdfunding, to help entrepreneurs and create jobs.

  4. Entrepreneurship and small business ownership come naturally to this ethnically diverse society.

  5. There is high social media usage and a willingness to connect with broader communities online – including the diaspora. (people from this country that live abroad)

What country is this? Suriname! Is the small Dutch speaking nation on the north-eastern side of South America. I traveled there to deliver a series of lectures and speeches on the value of entrepreneurship and the potential of crowdfunding to create jobs and inclusive economic growth. I had the chance to meet with business leaders, academics, students and entrepreneur’s in a series of events hosted by the U.S. Embassy in Paramaribo, the capital.

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FHR School of Business

I was there on behalf of the U.S. State Department for Global Entrepreneurship Week and was happy to be greeted by engaged and interested audiences at the various events around the capital. I learned that Suriname experiences the same challenges in getting funding to the most promising small businesses and entrepreneurs that we face here in the US. Because Suriname experiences many of the same problems that we experience with funding entrepreneurs, they were interested in hearing what I had to say about democratizing access to capital for all worthy small businesses. People there are working hard to help entrepreneurs create jobs and build better lives for themselves and their community. They want to learn as much as they can about what we are doing with Crowdfunding in the U.S. – not because they want to implement the same system of crowdfunding there, but because they want to take our lessons to create a uniquely Surinamese solution to the problem. The diverse country is full of opportunity for its people who are working hard to expand entrepreneurship and jobs. 

R Mitchell STVS Jrnl 20nov14 Suriname TV News   YouTube

Interview with STVS Channel 8

Because the ideas behind crowdfunding are so familiar to people in Suriname, and there is heavy social media usage there, they are well positioned to be leaders in crowdfunding by getting community based capital to small businesses and entrepreneurs in the country. I realized how much interest there was by the media coverage which included a piece on the evening news and a front page story on the national newspaper. I spoke at three universities and met with business leaders who are interested in what crowdfunding has to offer.

A highlight was the chance to meet with Apura NetWorks which is an online ecosystem for Suriname and its people abroad. They connect Surinamese people from around the world with each other with their technology and are now launching a crowdfunding platform to give the diaspora and those interested in Suriname the opportunity to support project’s in the country. They could make a huge difference for Suriname.

Apura is the first crowdfunding platform in the country but probably not the last. Suriname has many of the key ingredient needed to create a thriving crowdfunding ecosystem. (and some obstacles) Could they be the next leaders in the crowdfunding revolution?

 

Robert MitchellRob Mitchell heads up Success With Crowdfunding and is a Partner at Crowdfund Capital Advisors. He’s passionate about democratizing access to funding for small businesses and entrepreneurs, both at home and abroad, and is focused on helping them create successful crowdfunding campaigns. Rob Mitchell is part of the team responsible for the crowdfunding framework (Title III) of the JOBS Act signed into law by President Barack Obama. He is a serial entrepreneur who speaks frequently at crowdfunding and entrepreneurship focused events around the world. Recent speaking engagements include Stockholm School of Economics (Riga), Stanford University (AMENDS Conference), UC Berkeley (Berkeley Method of Entrepreneurship Boot Camp), Corvinus University (Budapest), and FHR School of Business (Paramaribo, Suriname). Robert is also a contributing author of ‘Crowdfunding’s Potential for the Developing World,’ a report written for the World Bank by Crowdfund Capital Advisors and is t

Beware of SEC Enforcement Actions Against Crowdfunding Platforms

The following post comes courtesy of Ellenoff, Grossman & Schole and should be read by all crowdfunding platforms

On November 10, 2014, the SEC announced one of the first enforcement actions against a crowdfunding platform, Eureeca Capital SPC, a company incorporated in the Cayman Islands and based in Dubai, for failure to implement procedures reasonably designed to prevent U.S. investors from accessing and investing in securities through its website. Despite a disclaimer that Eureeca's services could not be used by U.S. persons, users who selected "United States" as their country were allowed to register on the Eureeca website and gain full access to offering materials, and under certain circumstances, deposit funds with Eureeca for the purpose of investing. All visitors to the Eureeca website were permitted access to the names of issuers and amounts of offerings on its site, as well as informational videos; after registering, potential investors could access additional information regarding offerings and were sent automated emails detailing specific offerings. Eureeca did not require users to represent they were accredited investors during registration, its website did not contain any disclaimer or definition of "accredited investor", and communications to investors requesting confirmation of their accredited status did not define or otherwise explain what the term "accredited investor" meant.Screen Shot 2014-12-06 at 10.12.48 AM

The SEC determined that Eureeca had acted as an unregistered broker-dealer and violated the securities laws by generally soliciting U.S. investors prior to the implementation of Rule 506(c) in September 2013 and, after that Rule 506(c)'s implementation, failing to take reasonable steps to verify that purchasers of securities through its website were accredited investors. Eureeca was ordered to cease and desist from committing or causing any further violations of U.S. securities laws and was assessed civil penalties totaling $25,000.

Since the passage of the JOBS Act, the SEC, states and FINRA have been closely monitoring accredited investor crowdfunding platforms, with a particular focus on those platforms that generally solicit investors. In addition to Rule 506(c) compliance, particular issues of regulatory interest include the platforms' reliance on the exemption from broker-dealer registration; the accuracy of representations regarding the issuer's business; and the disclosure of the platform's compensation. Companies intending to form or currently operating crowdfunding platforms should work closely with securities lawyers to draft appropriate language for their websites and strictly adhere to the regulations implemented by the SEC to avoid sanctions.

Recommended action: The ability to respond quickly, credibly and effectively to regulatory inquiries depends upon recordkeeping. Platforms should therefore not only implement and maintain recordkeeping policies but also test that the information is readily available if requested on short notice. Records to preserve should include investor and issuer information in secure format (our intellectual property team can provide guidance on state-of-the art protocols); all agreements among parties, offering materials and subscription documents.

If you need more information regarding this, the team at Ellenoff, Grossman & Schole is available to discuss the information in this Alert with you. Please don't hesitate to contact the attorneys below or the primary attorney with whom you work.

Douglas Ellenoff ( This email address is being protected from spambots. You need JavaScript enabled to view it. )      

Joan Adler ( This email address is being protected from spambots. You need JavaScript enabled to view it. )

David Selengut ( This email address is being protected from spambots. You need JavaScript enabled to view it. )      

Adrienne Ward( This email address is being protected from spambots. You need JavaScript enabled to view it. )                             

Michael DeDonato ( This email address is being protected from spambots. You need JavaScript enabled to view it. )

Use equity or debt crowdfunding to give Ebola funders a vested interest in the outcome

The following was posted on OpenIdea by Sherwood Neiss
Ideas are great but they are nothing without money. Money solves one part of the problem, funding, but not the other, engagement. Crowdfunding has proven it is possible to engage a community of interest in the solution to a problem with funds. Debt & equity crowdfunding is showing that funds given in the form of an investment turn donors from passively involved to actively engaged. This means they become a marketing engine, help to sell a product/solution, help iterate on an outcome, and/or provide introductions to other key players - all because they have a VESTED interest in the success of their investment. This crisis could benefit from incorporating the crowd for their funds and to engage them as investors rather than donors.
How could it work 
Debt Scenario: 
1) Crowdfunding campaign to fund a cure 
2) Funds pledged are given as a convertible loan 
3) If a cure is found, any sales from the product will go to pay back investors 
4) Perhaps put a cap on the return (eg: 10x) 

 

Equity Scenario 
1) Crowdfunding campaign to fund a cure 
2) Funds pledged are given as equity 
3) If a cure is found the profit from any pharma who buys the solution will go to pay back investors 

NOTE: Both scenarios might require a US or UK Entity be the one that receives the money as they have the most established debt and equity crowdfunding markets.  Governments and regulators would have to collaborate under a special "Eboala Exemption" 
 

How Craigslist could get rid of 99% of fraud but is too lazy to do so

Screen Shot 2014-10-01 at 12.20.34 PMBeing on the forefront of all things crowdfunding, we get to see how new technologies are solving old problems. One of the areas where I bet we will see ‘less of a big’ problem is fraud when it comes to the private capital markets. Sometimes we hear stories of people investing in a business they heard of through a friend of a friend only to find out it was a scam, the company didn’t exist, or it was a shell business formed to steal money from unsuspecting investors. More often than not, these investors lose out on their money because it is impossible to track down the perpetrator.

The reason these scams take place is there is usually no one vetting the scammer. This is a problem technology companies like Early IQ (in full transparency we are an advisor to Early IQ) are solving. Early IQ has figured out how to detect fraud with almost 100% accuracy. The system works by requiring that individual’s self-disclose certain information up front that is then verified. Their team, databases, and algorithm then go to work to see if they are a real person, at a real address, with a real phone number so that if anything goes wrong the police know where to get them. 

With Early IQ, investors that want to invest in businesses that have been through an Early IQ fraud detection don’t have to worry about a potential shyster taking off to the Cayman Islands with their investment. This doesn’t guarantee that the business will be a success, but at least we’ve removed one of the biggest problems in the private capital markets, identifying fraudsters before they have a chance to commit fraud.

This got me thinking, what if Craigslist were to require everyone listing an item for sale or an apartment for rent to go through the same background check. How much fraud could be reduced on Craigslist if everyone selling something there had to have a badge certifying that they have a clean slate? And to prove it, you could click on the badge and it would take you to a website like Early IQ’s to confirm they performed the background check.  How much money would be saved from trusting buyers or renters that have been taken advantage of by unscrupulous scam artists?

I bet a ton of money and here’s a personal reason why. I listed my condo for rent this past spring on Craigslist. Some shyster took pictures of my pictures and started renting it as a short-term rental in a different area on Craigslist. He used a story that he was my tenant and was subletting it because he was transferred on assignment to Alaska. This was a total lie but he used my name, pictures and listing to build credibility.

More than 5 people eventually saw my real post and called me to say they lost money to this guy! They each sent him a deposit and never heard from him again. One poor soul showed up at the condo to MOVE IN for 3 months only to find out she’d been scammed.  I have no idea how many more people were taken advantage of.

Here’s another real life example.  I have a friend who runs a specialized online horse tack store and received a large order to be shipped to Argentina (not too crazy as this sport is popular there), but the "customer" required that he use a specific freight forwarding company rather than UPS.  Turns out that company didn't exist. Imagine if he had required an Early IQ check on the freight forwarding company? 

The analogy in B2B is that most if not all large corporations require new vendors to complete a vendor information application - generally run them through a BBB check and a credit check.  But for smaller companies and smaller vendors, it's not practical or particularly effective.

But think about all the fraud that could be deterred and money saved if Craigslist just required all buyers and sellers to be verified?  Think about the confidence people would have in Craigslist as a real marketplace if they knew they could track down and hold a fraudster accountable?

The technology and businesses like Early IQ are there. The reality is, Craigslist is just a “listing service” and “buyers need to beware.” Easy enough to hide behind that but if they really want to establish a credible marketplace as the crowdfunding industry is doing by verifying that the sellers of securities in businesses are real people at real addresses with real companies, perhaps companies like Craigslist need to incorporate some of these new technologies into their own business models?

What I learned at 4am going to the Miami Airport

Sometimes it takes me a while to really hear something and process it.  This was the third time and it finally sunk in.  A different side of the Uber/Lyft phenomena:  The Driver.  Woodie and I were headed to the Miami airport, for yet another flight, and we were chatting with the driver.  About half of the time when I'm in an Uber/Lyft the driver seems interested in talking and if so, I usually ask a few questions about how long they've been driving, how do they like it, what were they doing before, etc.  

When we asked the driver our first question about how long he had been driving for Uber/Lyft, he responded with "Uber has changed my life...Lyft has too."  I had heard 2 other drivers say this in the past, but not with the same emphasis has he did.  We asked him to tell us more.  Essentially it was this:  He came to the U.S. 20 years ago and and worked a steady series of security jobs making barely above minimum wage.  A few months ago he was working at a quick service restaurant and security at the same time.  A few months ago, he started driving for Uber/Lyft, and he had just quit his other two jobs the day before he picked us up.  He said again "It has changed my life" and talked about how much he enjoyed driving, meeting the nice people who used the service and that he was now able to start saving some money to start his own business one day.  The pride and joy in his voice was palpable and impossible to forget.  

I look forward to a time when thousands of business owners can talk about about how crowdfunding changed their lives, or the life of someone they knows...the ability to work hard, get funding from your community, and start a business.  Woodie and I are passionate about creating new ways for businesses and entrepreneurs to start businesses.  That is one of the reasons that by the end of this year, we will have flown a combined total of over 1,100,000 miles over the last 3 years to create this opportunity for people in countries around the world.   We will continue to do so, because we must if we are going to create enough jobs and business opportunities to stabilize economies/regions and engage populations in driving their own economic destiny.