Day One of Crowd Invest Summit Strives to Broaden Crowdfunding's Appeal

Joel Anderson  |


The Crowd Invest Summit West, held at the Los Angeles Convention center on Wednesday and Thursday, was geared towards helping equity crowdfunding break into the mainstream.

“The vision for Crowd Invest Summit is simple,” said Darren Marble, CEO of CrowdfundX in his opening remarks. “We want to connect everyday Americans with crowdfunded investment opportunities. The irony in this industry is that most of the other conferences that have happened in the last 12-24 months do not feature the two demographics of people that are ultimately going to fuel the growth of our industry: the issuers, the companies raising capital who are led by the pioneering entrepreneurs consciously choosing regulation A+ or regulation crowdfunding as a mechanism to grow their business, and the everyday Americans who are ultimately going to fuel the growth of our industry. So our purpose is to connect the issuers and the investors at this conference.”

That focus, making crowdfunding really work - not just for the finance industry elite who are familiar with the JOBS Act but for a much broader spectrum of innovators seeking capital and investors interested in being a part of a growing companies -, was on clear display as the summit laid out a vision for a future where crowdfunding could reach a larger swath of the American public.

And on day one, the packed slate of panels and speakers helped provide attendees with real insight into what that future of a generation of new entrepreneurs getting support directly from everyday Americans would look like.

Building the Crowdfunding Ecosystem

The day’s first speaker was legendary author and investor James Altucher, who delved into his personal history, and what he learned from a roller coaster of success and failure that led him to make millions selling two companies early in his life, only to blow through all that cash twice in a row. One valuable takeaway was to make a point of really engaging with his creative mind.

“I needed to really start exercising my creativity, almost like a muscle,” said James Altucher. “All your muscles atrophy really quickly… Creativity is the same way. … So I started writing down 10 ideas a day. Ten bad ideas a day.”

Following Altucher was a fireside chat between Darren Marble and Ron Suber, President of Prosper Marketplace, a P2P loan platform. Suber delved into the success that Prosper has found, including a hair-raising tale of a long Labor Day weekend when they were perilously close to seeing their success come crashing to a halt. He also emphasized that the key to success for an industry relying on the crowd required balance between users and companies. If any piece of the equation seriously outweighs the others, it disrupts the industry. During his concluding remarks, Suber emphasized that building a strong community was an essential part of finding long-term success for the industry.

“I would encourage this industry to really focus on the ecosystem, to be real supporters and champions of these companies that are trying to build this bridge and help you as an industry,” he said. “And then you as a company need to connect to the ecosystem.”

Social Conscious and Crowdfunding

After Suber, the day proceeded to its first panel, Crowdfunding for Social Good, one that really drove at one of the more pressing considerations for the crowdfunding industry: building a crowdfunding marketplace that is more equitable than the existing venture capital market. As the panelists observed and lamented, American society is dramatically segregated by race, class, and gender, and those divisions tend to reflect themselves in the way that startup companies get their funding. All too often, this marketplace that’s providing the innovation that stands to drive the development of the economy of tomorrow remains tragically out of reach for much of America.

Moderator Devin D. Thorpe, author and contributor for Forbes, and panelist Rodney Sampson, veteran author and tech entrepreneur, reminded the audience that the vast majority of venture capital goes to white men living in three states. While crowdfunding offers an opportunity to potentially break the stranglehold that New York, California, and Massachusetts has on startup capital, the industry will still need to address the fundamental issue that there remains a huge disparity in wealth in this country between white families and African-American and Latino families.

However, the panelists still seemed to display a cautious optimism that crowdfunding could be a useful and valuable tool for helping entrepreneurs of color get a chance to build the sort of businesses that could help remake the economy into a more equitable future, particularly if, as educator and founder of Crowdfund Better Kathleen Minogue emphasized, crowdfunding platforms could connect with governmental services supporting small businesses and looked to address the relative lack of digital literacy on the part of a large portion of the American population. Beyond the massive successes of a company like Elio Motors (ELIO), the potential for communities to raise money locally to support businesses in their neighborhoods and regions.

“I think local investing is the most direct form of impact investing there is,” said panelist and author of Locavesting: The Revolution in Local Investing and How to Profit From It Amy Cortese. “Because you can see and feel the impact of your investment and benefit from that in multiple ways. … You can’t have a strong national economy if you don’t have strong local economies.”

Bringing Shark Tank-like Competition to the Conference

The last event before lunch was a pitch panel that injected a little more excitement into the proceedings, with a panel of judges hearing five young companies pitch their business model for a chance to win prizes from Surf Air. The twist being that each company had a mere three minutes to sell themselves to the judges and then another three minutes to answer questions from the judges. The pressure was on, but all five startups did a solid job of selling their businesses.

While the judges got together to discuss the winner, Darren Marble sat down with Sunny Barkats of JS Barkats to discuss the recent launch of Thunder Crowd Capital, the only bridge fund for crowdfunding out there.

After Sunny and Darren wrapped up, the judges announced the two winners: Buzz Pop Cocktails, a company making frozen cocktails made as frozen pushpops, and FanWide, a social network that connects sports fans in different cities and offers local businesses a chance to host events for them.

PR, Accounting and Real Estate in the Crowdfunding Space

The event continued rolling after a break for lunch, featuring a series of panels in the afternoon that helped break down the nuts and bolts of what platforms, issuers, and investors need to understand about the process of doing a Reg. A+ or Reg. CF raise.

The first panel, From Crowdfunding to IPO, featured a number of industry experts delving into where crowdfunding stands to settle into the broader ecosystem of capital flow. While most companies are imagining a chance of eventually going public, getting there is going to be different for every company. Panelists emphasized that it was essential to understand where your company is and really consider whether or not Reg. A+, Reg. CF, or an alternative is the right path for you. No matter how appealing the thought of raising $50 million a year from everyday Americans might sound, a company that’s not ready for Reg. A+ is only going to hurt its growth by diving in for the wrong reasons.

The next panel was Crowdfunding Marketing and PR, a subject that, the panelists reminded attendees, could not be more important. The panelists really hammered home a reminder that crowdfunding is defined by its marketing efforts. A company that doesn’t communicate effectively can’t expect to meet their capital raising goals, and plenty of failed startups have underestimated just what it takes to successfully complete a raise. As panelist Christian Shelton, digital storyteller with CrowdfundX, laid out, the marketing budget for a successful crowdfunding campaign is typically at least 5.00% of the total amount a company plans to raise.

From there, the afternoon moved on to the subject everyone had been waiting for all day: accounting. While moderator Brittney Castro, founder and CEO of Financially Wise Women, did make the rye observation that Accounting Pitfalls in Crowdfunding may not have been at the top of everyone’s list of what to catch, the panel itself made it clear that the importance of having a solid accounting team in your corner for any crowdfunding campaign couldn’t be underestimated. With a tangle of important financial regulations in place to protect investors, staying on the right side of the law by keeping the books in order is essential. What’s more, transparency was a key to building trust, something that’s essential to a successful raise.

The accountants gave way to the lawyers in the next panel, as moderator Mark Roderick took the stage to introduce the panel Legal Pitfalls in Crowdfunding. With a lot of very complex legal language surrounding each of these instruments, the panel emphasized that having a solid legal team with whom you have strong lines of communication was one of the most important elements of a successful campaign, emphasizing that a failure to properly follow regulations could result in disaster. However, as panelist Amy Wan observed, the basic principle behind following these rules wasn’t as complex as the laws defining it.

“A lot of people tend to ask, ‘well, if I don’t have a very significant understanding of crowdfunding laws, what should I be doing? What do I need to know?’” She said. “And it’s the general rule of thumb for being a good person or a moral company: don’t do anything your mother would come back and yell at you for. So, don’t defraud people.”

Finally, the day concluded with Real Estate Crowdfunding, taking a deep dive into the segment that’s seen some of the most success in the early iterations of equity crowdfunding. Panelists frequently differed in opinion about which opportunities offered the most potential, but seemed to be on the same page that it was important to be transparent about opportunities and to do strong underwriting as a failure to provide returns for investors could hurt platforms in the long run.

Exploring a New World of Capital Formation

On the whole, the outlook provided by the Crowd Invest Summit on its first day was a stirring one, presenting a potential new world of capital formation that could expand the circle of investors experiencing the sort of huge returns associated with real capital appreciation as well as giving entrepreneurs who might previously have never seen their dreams come to fruition a chance to succeed. The summit was an outstanding chance for platforms, companies, and investors alike to network and discuss where the industry is headed and how they were going to get it there.

With another jam-packed day on Thursday, the event stands to continue offering an exciting look at an industry that could play a big role in building the businesses of tomorrow.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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Symbol Name Price Change % Volume
ELIO Elio Motors Inc 0.90 0.00 0.00 514

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