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Jenny Kassan is a pioneering attorney in the social enterprise space. I first met her two years ago when she delivered an insightful presentation at the San Jose Green Business Academy. There, she detailed ways that social entrepreneurs can raise capital.When we met last, she recapped her involvement with the federal crowdfunding legislation (part of the JOBS Act), which at the time was still making its way through Congress. (See her Huffington Post article here). Since then, the bill has passed and is awaiting official rule details from the Securities and Exchange Commission (SEC).

Meet Jenny Kassan, a pioneering social enterprise attorney

Jenny is incredibly personable, experienced, and passionate about connecting law, sustainability, and small businesses to create Jenny Kassansocially responsible ventures. She is the CEO of Cutting Edge Capital (check out their great blog), and a Partner at Katovich & Kassan Law Group.

It was a sincere pleasure interviewing Jenny for Innov8Social. It was an opportunity to hear more about her path to social enterprise law,  her interest in pushing for equity crowdfunding for non-accredited investors, her current work with creating new financial tools, and advice she has for individuals entering the social enterprise law and policy space.

Listen to the interview

A few interesting takeaways:

  • After law school, Jenny became interested in community development
  • Saw that law alone didn’t necessarily help individuals in disadvantaged communities—legal remedies do not always address the root of issues
  • Completed a Masters in City Planning after law school
  • Worked at community development nonprofit, Unity Council for 11 years, in the commercial district in Oakland
  • Loves working with small business owners
  • Joined John Katovich’s firm and worked to find new ways for small businesses to pursue financing
  • Launched Cutting Edge Capital in 2011, focused on creative financing tools for social enterprises—with focus on raising funds from their communities
  • Direct Public Offering (or investment crowdfunding) is a financial tool small businesses can use to raise funds: is legal, but must comply with strict legal compliance guidelines, open to accredited (wealthy) and non-wealthy investors
  • Suggests law students interested in social enterprise law take classes and electives in corporate law subjects

 

Big news for Cutting Edge Capital!

*Note: Since our interview, Cutting Edge Capital successfully raised $150K in a Direct Public Offering of their own. Congratulations! You can contribute until July 1, 2013. More information here.

How do you manage your charitable giving?

For many people donations are impulse investments—a friend is running a race to fund cancer research, you see a photo of animals being mistreated, a natural disaster impacts thousands of individuals and you want to do something, you strongly support a cause on principal and want to vote with your dollar.

Bright Funds, a New Way to Manage Charitable Giving

Bright Funds, an innovative social enterprise startup launched in 2012, takes an investment portfolio approach to charitable giving. Bright Funds is an online platform that makes the process of donating more like investing—where you can create an individualized portfolio, diversify your giving according to interests and causes, and research relevant non-profits within your selected “Bright Funds”.

Julie StreuliMeet Julia

Innov8Social had a chance to catch up with Julia Streuli, Head of Communications of the lean Bright Funds startup team to talk about the inspiration behind the idea, how the platform works, and what’s ahead for the company.

Read the Interview

Q1 | Innov8Social: What problem is Bright Funds addressing?

A1 | Julia Streuili, Bright Funds’ Head of Communications:

In talking to Julia her enthusiasm for the concept behind Bright Funds and its potential to shift how we think about charitable giving is immediately apparent.

Julia highlighted the fact that high net worth individuals and philanthropists often hire people to research nonprofits to receive donations, noting however; that there are not many tools available for the average individual to track, research, and design charitable giving.

credit: brightfunds.org
She explained that Bright Funds provides an investment approach to individual giving to ensure that donor dollars are channelled to non-profits that are highly impactful. There is a certain pattern in giving: 1) choose where to give and, 2) give; however, missing from the usual equation is 3) find out what impact your giving had on the cause. Julia noted that Bright Funds closes that “feedback loop” between donating to a nonprofit and following up on the impact of your donation by featuring non-profits that have a track record of being highly impactful in certain core sectors.

Specifically, Bright Funds uses multiple lenses to identify impactful nonprofits including assessments from platforms such as: CharityNavigator, Charity Watch, Universal Giving, GiveWell, and Philanthropedia.Individual donors (i.e. Bright Fund investors) choose the percentage of giving for each of four broad sectors: water, poverty, environment, education, health, or they can choose their own fund of non-profits not included in the Bright Funds list.  They can then research and select specific non-profits that serve their interest in the sector.Julia said that creating a portfolio based on sector was by design—because it shifts the focus from charities to the causes they champion. By aligning yourself with causes that are important, you can better assess impact on the issue, rather than the organization.

Q2 | Innov8Social: What tools does Bright Funds offer?

A2 | Julia, Bright Funds:

Julia overviewed the quick protyping and release of Bright Funds offerings. The startup launched a consumer-facing site in 2012 on #GivingTuesday, enabling anyone to create a profile and begin designing and tracking their charitable giving—all for free. The team is now in the midst of launching an enterprise platform.

The enterprise tool integrates with a company’s benefits system. It lets employees design and track donations and customize the list of nonprofits featured. So far, Bright Funds has seen interest in the new tool by various Fortune 500 and mid-sized Bay area tech companies. Many companies already feature allocated giving programs, but most haven’t designed a holistic approach to help employees manage their giving. Bright Funds sees potential for more-effective platform for personal giving, that can allow for efficiencies such as direct deposit (from an employee’s paycheck) as well as utilizing a company’s donation-match policies.

Q3 | Innov8Social: How does Bright Funds vet the nonprofits featured in its funds?

A3 | Julia, Bright Funds:

As mentioned, Bright Funds has identified major five major categories, each of which form a different Bright Fund (i.e. there are currently 5 Bright Funds: water, poverty, environment, education, health, or customized fun).

If donors are interested in supporting a specific cause or effort, they can read through the descriptions of the non-profits for each Fund to identify the “facets” (or focus areas) for each non-profit and can select or deselect individual non-profits to support on that basis.

Julia noted that Bright Funds strives to be objective in selecting nonprofits to be in porfolio offerings. As mentioned, Bright Funds looks at 5 different insititutional charity evaluating bodies, each of which has its own criteria to identify funds. Pooling information from various assessment platforms enables a more holistic view of non-profits—so as not to favor more-established charities over newer ones, etc.

Notably, Julia added that consumers can add any nonprofit/favorite nonprofits. For companies, if they support a group of local nonprofits, Bright Funds can build company fund portfolio.

Q4 | Innov8Social: Can individuals support social enterprises in their Bright Funds portfolio?

A4 | Julia, Bright Funds:

Julia said that at this time, individuals cannot support a social enterprise in their Bright Funds portfolio. She noted that Bright Funds has a non-profit foundation, through which donation is channelled. So it is possible that a donation to social enterprise could go through the Bright Fund Foundation.

Q5 | Innov8Social: What legal structure has Bright Funds’ selected?

A5 | Julia, Bright Funds:

Bright Funds is structured as a for-profit startup and non-profit foundation. Specifically, the for-profit entity is a commercial fundraiser– which means that it has signed contracts with all charities in the fund to act as a fundraiser for the nonprofit.

Julia noted that originally both cofounders considered becoming a nonprofit, but wanted to be able to leverage the initial investment. The decision to become a commercial fundraiser was based on idea that 100% funds should be tax deductible.

Q6 | Innov8Social: Is Bright Funds scalable?

A6 | Julia, Bright Funds:

Julia noted that since Bright Funds is a cloud-based platform, it is relatively easy to scale.

Q7 | Innov8Social: How has Bright Funds been funded?

A7 | Julia, Bright Funds:

Julia shared that Bright Funds has been backed by investor funding. It closed its first round of funding from angel investors around time when consumer platform launched in 2012. It is also a portfolio company at Hattery in San Francisco. She also mentioned the immeasurable assistance and mentorship that Leila Janah, Founder of Samasource and Bright Funds Board advisor and mentor, has provided.

Q8 | Innov8Social: How is Bright Funds monetized?

A8 | Julia, Bright Funds:

Julia explained that with its commercial fundraising status, Bright Funds takes a percentage of the raise. And noted that the amount taken is often about half of what the non-profit would budget for marketing and attracting donations.

Note: This post was edited to clarify distinctions of categories and types of Bright Funds. 
Over fifty women and a handful of men gathered at the eco-chic offices of Kiva in downtown San Francisco on Tuesday, February 12th 2013 to discuss social entrepreneurship. The panel of experienced women practitioners and mentors in the field was organized by Linda Cleary and Barb Krause of Women in Business (WIB), a subgroup of the Northern California German American Business Association (GABA).

GABA Panel of Women Social Entrepreneurs @ Kiva
Women Social Entrepreneurship Panel, hosted by GABA and Kiva

 

While the panelists—from IndieGoGo, Kiva, Santa Clara’s GSBI program, and social enterprise startups— explained their work and organizations’ missions, they made the gathering uniquely personal by sharing their individual stories and journeys in the field.

Moderated by Britt Huber of Kiva

 

Seven panelists shared the stage and were hosted by the evening’s Moderator Britt Huber, Kiva’s VP of Human Resources. Britt outlined the role Kiva has played in expanding microfinance, noting that repayment rate for the organization’s micro-loans to borrowers in developing countries is over 95%. Kiva, a 501(c)(3) non-profit,  has expanded it’s presence to 67 countries since its inception in 2005 and is powered by over 100 employees and 400 volunteers.
GABA Panel of Women Social Entrepreneurs @ Kiva
Moderator Britt Huber

The speakers sat on stools in front of the audience creating an informal, intimate setting.  Each gave a brief introduction, and then Britt posed a few questions spurring anecdotes and candid reflections before opening the session up for Q&A from the audience.

  • What was the trigger motivation that shifted your interest to social entrepreneurship?
  • What are you most proud of? What keeps you up at night? (See below for their responses)
  • How do you define a nonprofit and for-profit social venture? How should a social entrepreneur decide?

Meet the Panel

Panelist Dr. Laura E. Stachel, Co-Founder of WE CARE Solar.
After fourteen years practicing obstetrics-gynecology medicine, a back injury took Dr. Laura out of the daily practice of medicine and on a path to pursuing policy through a Masters in Public Health.  She redefined her connection to the medicine following a trip to Nigeria. The purpose of the travel was to study and support local physicians in a region with high maternal mortality rates; however, she discovered a very essential problem limiting medical care at the facility. Light, or the lack of it. Because of the region’s sporadic electricity, doctors and nurses were using makeshift lighting methods such as candles and headlamps to administer surgeries and intensive care. Dr. Laura emailed her husband, a solar energy innovator, and the seed of a social enterprise was planted.  Together they developed prototypes and researched need for a solar-powered off-grid electric system that was portable.  Five years later, and WE CARE solar suitcases have been delivered to medical facilities in countries including Sierra Leone, India, Sudan, Nigeria, Liberia, Uganda, Malawi, Thailand, Burma, and Somalia. Organized as a 501(c)(3) non-profit, WE CARE Solar has received recognition, awards, and multiple grants facilitating its growth and scalability.

What she is proud of: Creating an impact on women’s healthcare.
What keeps her up at night: The daily challenges of running a business.

Panelist Lesley Silverthorn Marincola, Founder and CEO of Angaza Designs
Lesley’s background in human-centered design stems from her study of product design and mechanical engineering at Stanford and hands-on work on the first three generations of the Amazon Kindle. She co-founded Angaza Designs in 2009 after living in Tanzania and experiencing first-hand the local dependence to kerosene-powered light. Lesley and a small team were compelled to innovate a design-oriented solution. She shared the iterative ideation process Angaza Designs has gone through in developing an off-the grid energy solution that is also affordable. The team’s initial product was a high-powered light bulb with relatively steep up-front costs. Realizing that it wasn’t affordable for the populations they were trying to serve, Angaza pivoted to create a low-cost pay-as-you go solution. The product that resulted was the
GABA Panel of Women Social Entrepreneurs @ KivaSoLite3 Solar Home System that emits bright LED light and also charges cell phones, which is supported by a unique payment platform allowing for small-sum payments. Her company is a for-profit social venture, with an emphasis on keeping up-front costs low.

What she is proud of: Being okay to fail.
What keeps her up at night: Fundraising—you need to be really resilient as a social entrepreneur, passion is not always enough.

Panelist Dr. Lee Ng, Director of Social Venture Technology at Siemens and Mentor at SCU’s Global Social Business Incubator.
In a humorous, candid style, Dr. Lee imparted sage advice to social entrepreneurs and would-be social entrepreneurs based on her years of experience and mentorship in the field. Her day job at Siemens keeps her close to emerging technologies in cleantech, and as a mentor at SCU’s GSBI program for the past seven years, she has been able to impart valuable knowledge to entrepreneurs from around the world who have a social mission for their venture. She emphasized taking a practical approach to deciding on a social entrepreneurship structure—consider first, the type of funding your organization will be seeking and then evaluate the formation structures with that in mind.

What she is proud of: Her mentees who have succeeded in their social ventures.
What keeps her up at night: Her teenagers :)



Panelist Michelle Kreger, Senior Director of Strategic Initiatives at Kiva.
When Michelle joined Kiva in 2006, after volunteering with the organization as a translator, Kiva serviced $2M in micro-loans to borrowers fighting poverty in developing countries. Seven years later, the non-profit has serviced over $400M in loans. The exponential growth in participation in  microfinance has also changed the landscape and needs of the industry. In 2011, she joined an emerging group at Kiva dedicated to exploring new loan products to serve the influx of new players in the social impact world. One main constituencies she focused on was social entrepreneurs. Kiva has partnered with over 30 social enterprises to fund projects and support their work. These new partnerships span fields from education, innovative agriculture, clean energy, water and sanitation, to transportation and health. Her team recently partnered with Strathmore University in Kenya to create student loans payable in 10-12 years.

What she is proud of: Consciously deciding to break a model that works to create new models.
What keeps her up at night: How to find people who are social entrepreneurs and don’t know it, and how to use Kiva’s network to support their work.

GABA Panel of Women Social Entrepreneurs @ KivaPanelist Erica Bliss, Past Manager at Technoserve and President of Women Entrepreneurs at Haas.
After gaining experience as a business analyst, Erica discovered Technoserve as a way to leverage her consulting skills to support social enterprises in developing countries. She spent two-and-a-half years as a TechnoServe Consultant and Manager in Uganda assisting local farmers develop partnerships and products to increase local market share. She also served as a consultant to the Bill and Melinda Gates Foundation in Africa before returning to California to pursue an MBA with a focus on social enterprise. She shared a unique experience working with local farmers to create a mango juice sourced from local mangoes to parallel popular juices imported from other countries.

What she is proud of:  Building a cohesive team in Africa that continues the work they started together.
What keeps her up at night: The massive population of youth under the age of fifteen in Africa and the challenges, such as job creation, that they will face in the coming years.

Panelist Juli Betwee, CEO, Pivot.Point Partners and Mentor at SCU’s Global Social Business Incubator.  Juli has over twenty-five years of experience in business consulting and strategy. Recently, she partnered with the GSBI at Santa Clara University to leverage her knowledge and experience in business to support social entrepreneurs. New to the field of social entrepreneurship, she offered a practical look at the industry from the lens of corporate growth and scalability. About how to measure social impact, she noted that assessing social impact engages a three-dimensional way of thinking which calls on looking at predictive analytics rather than historic analytics and focusing on trends, patterns, and correlations rather than simply numbers.

What she is proud of: Impacting and influencing over 100 women entrepreneurs.
What keeps her up at night: How to move more quickly to make greater impact with social entrepreneurs.

Panelist Erica Labovitz, Director of Strategic Programs at Indiegogo.
Erica admitted to the audience that she hadn’t considered herself to be a social entrepreneur before speaking on the panel, but in sharing her personal history in engaging in education and policy work in the U.S. and abroad it became clear that she wears the title well. Erica studied in Economics in college and pursued a Masters degree at Northwestern’s School of Education and Social Policy. While on a volunteer trip in Africa she received an email from the founders of IndieGoGo asking her if she wanted to join their team. She was one of the first four employees at the popular crowdfunding platform. She is interested in finding creative ways to leverage the potential of crowdfunding platforms and enterprise tools to serve social impact. IndieGoGo is a for-profit corporation.

What she is proud of: Generating esteem-building through job creation.
What keeps her up at night: How to create a level playing field for startup entrepreneurs.

GABA Panel of Women Social Entrepreneurs @ Kiva

 

 

In case reading about the crowdfunding for investment legislation wasn’t enough to understand the field and the new law, Fundable and EarnMBADegree created this compelling infographic on Visual.ly.The part about the history of crowdfunding was especially interesting–ArtistShare entered the crowdfunding space in 2001—four years before Kiva, and eight years before Kickstarter! 

The JOBS Act & Crowdfunding

Browse more data visualization.

 

The short answer is: ask the SEC.

texting the sec

The Recap

As you may have read here or around the web, federal legislation has passed that creates a pathway for crowdfunding for equity—which enables individuals (not just the qualified, wealthy individuals known as accredited investors).

Here are some of the main highlights of the history of this legislation:

  • July 2010: Northern California-based Sustainable Economies Law Center files a petition with the Securities and Exchange Commission (SEC) requesting a crowdfunding exemption.
  • Sept 2011: U.S House Representative Patrick McHenry (R, NC) introduces H.R. 2930 (Entrepreneur Access to Capital Act) which proposes a crowdfunding for equity exemption in Congress
  • Nov 2011: U.S. Senator Scott Brown (R, MA) introduces S. 1971 (Democratizing Access to Capital Act) in the Senate which proposes a crowdfunding for equity exemption in the Senate
  • Nov 2011: President Obama publicly supports the crowdfunding for equity efforts
  • Nov 3rd 2011: House of Representatives passes H.R. 2930
  • Dec 8th 2011: U.S. Senator Jeff Merkley (D, OR) introduces CROWDFUND ACT S. 1970 (different terms than the Congressional bill)
  • Mar 22 2012:  Senates passes S. 1970
  • Apr 5th 2012: President Obama signs the Jumpstart Our Business Startups (JOBS) Act by President Obama on April 5, 2012 which includes a crowdfunding for equity exemption.

There are a few amazing resources that can give you a visual, play-by-play, editorial, and contextual view of the crowdfunding legislation. Check them out:

The next stop for the crowdfunding legislation after the President’s signature, was to the SEC to promulgate rules on how crowdfunding for equity would actually work.

 

Where the Crowdfunding Legislation is Now?

Paul Spinrad, who helped initiate the crowdfunding for equity legislation and who has been an avid blogger on the subject, noted in a July 2012 post that the SEC Chair Mary Schapiro anticipated that crowdfunding for equity rulemaking to be complete by the end of 2012.

However, since that time, Spinrad and others have reported that Schapiro will be stepping down as SEC Chair. The announcement has been confirmed by news outlets, and she is scheduled to step down on Dec. 14th 2012.

In his mid-November 2012 post for thecrowdcafe.com, titled “Dear SEC: The Right to Accept Risk Must be Ours” — investment crowdfunding researcher Jonathan Sandlund succinctly summarized parts of the JOBs Act related to crowdfunding and offered his view on how long it will take for the laws to be implemented. Notably, he said:

“Title II of the JOBS Act lifts the ban on general solicitation and advertising of security offerings, enabling companies to efficiently solicit and raise capital from a large (or small) number of accredited investors online. Effectively, Title II will kickstart crowdfunding from accredited investors (high net-worth individuals). While the SEC is well passed the Congressionally mandated deadline of July for Title II, many in the industry are cautiously optimistic that we’ll see action by the end of this year, or early next. Title III of the JOBS Act (The CROWDFUND Act) on the other hand, which creates a democratized private capital marketplace by allowing investors of all economic classes to participate, isn’t looking so good.”

 

The Skinny

Title II of the JOBS Act

what it does: lets companies solicit from accredited investors online
SEC rulemaking: was supposed to be passed by July 2012, likely to be passed Dec 2012 or early 2013

Title III of the JOBS Act

what it does: lets non-accredited investors invest smaller amounts in companies for equity
SEC rulemaking: was supposed to be passed by end of 2012, but looks now like it will be passed by end of 2013

 

VLAB crowdfundingThere was standing room only at June 19th 2012, “Crowdfunding: Disrupting Traditional Funding Models”panel hosted by MIT/Stanford Venture Lab (VLAB). The event was held on the Stanford campus at the Li Ka Shing Center for Learning and Knowledge.The talk centered around the passage of the federal crowdfunding legislation as part of the JOBS Act, and its implications.

Agreeing to Disagree

Berg Hall, StanfordThe panel was moderated by the founder of Crowdsourcing.org, Carl Esposti and featured players with  unique perspectives associated with the field. The main points of distinction between panelists had to do with the benefit (or proposed detriment) that is to come part and parcel with the new crowdfunding legislation. And while each panelist had significant experience and perspective on the topic, the opinions clashed on key points, making it all the more interesting to listen in on.
The evening also included a video message from Senator Scott Brown who introduced the crowdfunding legislation as a way to fund innovation. He noted that the SEC is reviewing the legislation and is accepting comments at SEC.gov.
Below are some main points raised by the speakers.

 

Moderator: Carl Esposti, Founder at Crowdsourcing.org <<@crowdsourcing_>>

Mr. Esposti gave a little background on his experience in crowdfunding, which he began exploring 4 years ago. He entered the field to determine the ‘why’ of why bets are placed on whether companies succeed and to dive deeper into determining if crowdfunding companies would eventually lead to job creation. Since his entry into crowdfunding he noted that crowdfunding has taken on larger platforms and payment systems.

VLABCrowdfunding.org conducted a survey which found a growth in the number of crowdfunding platforms from 450+ as of April 2012 to a projected 500+ by the end of 2012. He noted that the steep expansion of platforms is partially attributable to the ‘low cost of admission’ since there is often not much required in the way of setting up a crowdfunding platform.

He highlighted the U.S. as home to the greatest number of crowdfunding platforms, but noted that Europe is on the heels, and there are increasing efforts in Britain, Brazil, Netherlands, Australia, India, and China.

A key point Mr. Esposti set forth is the impetus behind crowdfunding as a way to support and grow entrepreneurship. He stated that crowdfunding is largely grounded in our desires for social experiences, to be part of something bigger than ourselves.

4 Types of Crowdfunding Platforms

Mr. Esposti outlined four distinct types of crowdfunding platforms, and noted that over $1.5 billion have been raised through all four types, and that reward-based platforms are the fastest growing ones.
  • equity-based crowdfunding (incl. revenue + profit-sharing)
  • reward-based crowdfunding
  • lending-based crowdfunding
  • donation-based crowdfunding

Panelist: Slava Rubin, CEO & Co-Founder at Indiegogo <<@gogoslava>>

Mr. Rubin started his talk on a very personal note, sharing the story of his father’s passing when he was only 15 years old. Ten years later Rubin decided to start a charity for cancer and used online platforms but noted that the process, in his words, “sucked”. He launched Indiegogo on January 17th, 2008 as an alternative to existing crowdfunding platforms.
He talked about how crowdfunding is not a new concept, noting that a version of it was used to raise funds for the base of the Statue of Liberty.  He shifted into explaining the concept of Indiegogo, namely   to be a global crowdfunding platform where anyone can raise funds for anything. In 2009 Indiegogo was open to all, and today hosts 70K campaigns, in 200+ countries, with millions of dollars raised, and a contribution happening every 55 seconds.
Mr. Rubin underscored that Indiegogo is a “no judgment platform” that does not filter the kinds of campaigns created. He noted that successful campaigns have had good pitches, have been proactive, and have been able to find an audience that cares about the campaign.
He also spent a few minutes dispelling myths related to starting a company:
  1. startup myth: there’s a right time to start a company—Rubin said there’s not. His team started in 2008, he noted that perseverance is a key trait for startup success.
  2. startup myth: you need a lot of initial funding to start—Rubin said Indiegogo bootstrapped for a long time.
  3. startup myth: you need a business plan—Rubin dismissed this myth saying, instead, that you need a 1 pager with your idea
  4. startup myth: it’s all about the idea—Rubin stated that while ideas are interesting, its actually about the expectation created from the idea.

Panelist: Ryan Caldbeck, CEO & Founder, CircleUp <<@CircleUp>>

Ryan Caldbeck recently founded CircleUp as a platform to present investment opportunities to investors. He explained that investors visit the site, read about various new companies, invest in them, wire funds over, and become an owner in the company.

Mr. Caldbeck expressed his skepticism about the new federal crowdfunding legislation which opens investment to non-accredited investors in addition to accredited investors (the current rule). He is concerned that venture capital (VC) firms will just make a decision to pass on companies seeking crowdfunding.

Panelist: Daniel Zimmermann, Partner, WilmerHale <<@WilmerHale>>

Mr. Zimmerman is a partner at WilmerHale, a corporate law firm with offices in a dozen cities across the globe. His specializes in corporate and transactional law. Regarding the new crowdfunding legislation, he said it would be interesting to see what specifics the SEC arrives at with regards to implementation and compliance.

He provided a background explanation of the crowdfunding legislation stating the JOBS Act laid groundwork for the bill. Mr. Zimmerman mentioned that where existing crowdfunding efforts and platforms are aimed at simplifying the raising of capital through loans and donation, there is a possibility that the new legislation may complicate the process.

Panelist: Don Ross, Managing Director/Founder and Board Member, HealthTech Capital and Sand Hill Angels <<@Sandhillangels>>

Don Ross provided a venture capital perspective to the conversation. In addition to being the Founder and Managing Director of HealthTech Capital, a funding group made of private investors supporting startups at the intersection of healthcare and technology, Mr. Ross is also a Board Director of Sand Hill Angels. Sand Hill Angels is a consortium of successful Silicon Valley tech professionals who are dedicated to supporting formation and growth of startup companies.

Mr. Ross stated that rewards-based crowdfunding has generally been ‘totally embraced’ by the VC community and noted that equity-based crowdfunding models may have hidden ‘landmines’ and issues, especially with regards to the how the new crowdfunding legislation may be implemented. He pointed to messy capital tables, liability issues, and requirements for public disclosure of business plans (eliminating the ‘stealth mode’ advantage most startups aim for) as issues that could become further complicated by legislative requirements.

He also stated that allowing non-acredited investors could raise accountability issues, increase responsibilities of entrepreneurs, and may even create situations ripe for abject fraud.

Carolyn Kaster / Associated Press / April 6, 2012, credit: latimes.com
Carolyn Kaster / Associated Press / April 6, 2012, credit: latimes.com
Carolyn Kaster / Associated Press / April 6, 2012, credit: latimes.com

On Thursday (4/5/12) President Obama signed into law groundbreaking crowdfunding legislation that would open up investment to start-ups to anyone—not just accredited investors.

The bill reached his desk after passing with an overwhelming majority in the U.S. Senate in late March.

The news is huge and Jenny Kassan–President of Community Ventures and Co-Founder of Sustainable Economies Law Center (SELC) had this to say in a recent HuffingtonPost article, “The legislation is remarkable, as it (rightly) reverses more than 90 years of restrictions on raising capital at the grass-roots level.”

Kassan advised student volunteers of SELC when they filed a petition with the Securities and Exchange Commission in 2010 requesting an exemption to the archaic rules that allowed only accredited investors to invest in start-up ventures.

The organization’s perseverance and momentum as key politicians from both sides of the spectrum rallied behind federal legislation changing the existing law.

I had a chance to talk to Jenny about the legislation and her role in the new law in November 2011 and was impressed with her knowledge of the history of the law surrounding crowd sourced investment and her knowledge and familiarity with the bills.

It’s an exciting place to be for social entrepreneurs…with great potential ahead.

With the U.S. Senate’s passage of a crowdfunding bill (CROWDFUND Act) that served to amend the House’s parallel bill (JOBS Act) this week, there are a number of insightful articles, blog posts, and online resources discussing the crowdfunding bill and its implications. Here’s a sampling:

  1. Senate Passes Brown-Merkley Bipartisan Crowdfunding Bill (Sen. Scott Brown)
  2. Crowdfunding Bill Passes in U.S. Senate, 73-26 (Innov8Social)
  3. U.S. Senate Votes in Favor of Crowdfunding! (StartUpExemption)
  4. Crowdfund Act (S.2190) (crowdsourcing.org)
  5. Bipartisanship, new businesses and new jobs, with a little help from your friends (Google Public Policy Blog)
  6. Soon Even Your Mom Can Invest: Senate Passes Crowdfunding Bill 73-26 (With Protections) (TechCrunch)
  7. Senate Passes Start-Ups Bill, With Amendments (New York Times)
  8. US Senate passes crowdfunding bill to allow Kickstarter-style investing (TheVerge)
  9. Tech Startups in Line to Benefit from Senate Backed Crowdfunding Bill (PR Newswire)
  10. The legitimate goals — and overblown claims — of the JOBS Act (Washington Post)
  11. Senator Brown’s Crowdfunding Legislation Passes as Part of the JOBS Act, Paving the Way for Increased Entrepreneurship (SF Gate)
  12. How Will the JOBS Act Affect Small Business? (Reuters)
  13. U.S. Entrepreneurs Need Crowdfunding To Create 1.5 Million Jobs (HULIQ)
Feel free to add any others that you have come across in the comments below.
shift forwardThe U.S. Senate passed the CROWDFUND Act, a bill allowing average citizens the ability to invest modest amounts in emerging start-ups, by a vote of 73-26 this past Thursday this (3/22/12).We talked about this bill in earlier posts “What is Crowdfunding?“and “Crowdfunding Bill Goes to the U.S. Senate” on Innov8Social. Those posts outlined the concept of crowdfunding for investment, versus for donation (as online platforms such as Kickstarter successfully facilitate).Under existing law, the SEC only allows accredited investors to easily invest in start-ups. The U.S. House of Representatives passed a version of the crowdfunding bill in December 2011 and again in March 2012. The House’s version is named Jumpstart Our Business Startups–tidily referred to as the JOBS Act. And now the Senate has responded with passage of the CROWDFUND Act, which serves as an amendment to the JOBS Act.

A look at the CROWDFUND Act

Key features of the U.S. Senate’s CROWDFUND Act include:

  • Entrepreneurs can raise up to $1M annually through an SEC-registered crowdfunding portal.
  • Individuals earning less than $100K can invest the greater of $2K or 5% of their income. Those earning more than $100K can invest the greater of $100K or 10%.
  • Crowdfunding portals must provide investor protection, including investor education about risks related to small issuers and liquidity.

Crowdfunding for Investment, the Social Entrepreneur’s New Frontier

It is hard to even begin to assess the potential impact of citizen investment in emerging companies. And, for social innovators, it is an exciting new juncture. We have talked in the past about citizens’ abilities to ‘decide with their wallets’ through buying from socially responsible companies and outlining new policy an legislation that supports social entrepreneurs. This new turn enabling tangible investment in new companies only underscores this concept. It can make each of us impact investors, seeking both financial and social return on our small investments.

Social entrepreneurs, it’s time to get in the know about the specifics of this legislation and become poised to act if it passes and is signed into law by President Obama.

As they say, shift happens. And sometimes, we shift + forward.

With crowdfunding sites gaining popularity as a way to fund ideas, you may find yourself wondering what happens after money is raised. Back in December 2011 we did a Q&A with the founder and CEO of social enterprise Yellow Leaf Hammocks, Joe Demin. At that time Yellow Leaf Hammocks was about three weeks into a Kickstarter campaign to raise $10,000 to build and manufacture a stand for the company’s sustainable hammocks.

Yellow Leaf Hammock logo

A Crowdfunding Story, Continued…

Having already raised the lion’s share of the ask, Joe and his team still had $3000 left to raise within 9 days. And, as explained in the Kickstarter rules, the entire amount would have to be raised for Yellow Leaf to have access to any of the raised funds.

The group’s hard work paid off. Yellow Leaf Hammocks was able to inspire a total of $11,400 worth of donations to fund their project on Kickstarter, and they did so with 90 backers and 4 days left on the clock. We caught up with Joe to find out about how they were able to garner the remaining the funds and to learn about what happens after money is successfully raised.

Yellow Leaf Hammocks Q&A Follow-Up with Joe Demin

Joe DeminQ | Innov8Social:  Joe, thanks for joining us again. And many congrats on the successful campaign! How was it raising the final $3K? Did you try any different techniques than earlier in the campaign to inspire support?

A | Joe Demin, Yellow Leaf Hammocks: Thanks so much! The homestretch was a little nerve-wracking at times, to be honest.

We had heard from a lot of people that donations tend to slow down in the middle of a campaign, then build momentum again during the final days—but we didn’t want to take that risk & come down to the wire!

Our outreach was pretty consistent over the course of the campaign, which was reflected in the fairly consistent pace of pledges. We continued to share daily facebook & twitter updates and e-mailed our supporters once or twice a week. We really liked using the Campaign Update function on Kickstarter to keep our donors & supporters fully in the loop.

Toward the end of the campaign, we were worried about overwhelming people with ongoing messages, so we tried to reach out on a more personalized basis. It’s human nature for some people to procrastinate—we ended up with people pledging at the very last minute! One huge pledge came in with less than two minutes left in the campaign!

Through the whole campaign, it was awesome to watch Kickstarter’s statistics and see how people found us—almost 1/3 of our donations came through the social networks (for example, people who saw the campaign in a friend’s facebook status). It was amazing to see that our fans were inspiring a whole new group of people to become involved!

Q | Innov8Social: So, what happened immediately after the funds were raised? And how did you & your team feel when you found out you had achieved to goal?

A | Joe : We were ecstatic when we hit $10,000! It was really gratifying and humbling to feel the support and excitement of this amazing community of backers. We posted the news through all our social networks and tried to just express our excitement and gratitude as we soaked in the news!At that point, we had 4 days left in the campaign, but a lot of people didn’t realize they could still pledge after the goal was reached. We did one last push to make sure people knew they could still get a hammock in time for Christmas & be a part of the campaign. That spurred another round of backers, so we ended up exceeding our goal by nearly 15%!Once the campaign officially closed, we immediately shipped out the first batch of Kickstarter rewards (the ones that were meant as holiday gifts), then took a nice relaxing break to celebrate over the holidays!Q | Innov8Social: You guys had set up some great rewards for donors. How has the process of following up with the rewards been?

A | Joe : It is definitely time-consuming! I think we underestimated the time it would take. It was a challenge to organize the process and there was a mad dash to get those initial rewards out in time for Christmas. We are continuing to work on fulfillment for a couple of the backer levels and we’re especially excited about getting these first stands manufactured and shipped out for spring!
That being said, putting these packages in the mail is one of my favorite things to do! We are so grateful to our backers and it’s nice to be able to express that gratitude in a meaningful way. I’ve personally hand- written a Thank You note to each person and we’ve sent them each a Polaroid from the Mlabri village.
We also worked with a designer to put together a ‘Rewards Suite’ of beautiful, unique gift cards and stationery, because we wanted it to be a really special experience when people opened up their rewards package.It meant a lot to us that people saw our vision and supported us and we wanted them to know we were truly thankful.
Q | Innov8Social:  Does Kickstarter do any follow-up after funds are raised? Do you have to complete any additional forms?

A | Joe : No. Before you start the project, you do all the necessary paperwork & get them your financial info. When the project closes, they transfer you the funds (minus their fee). They also send you an email with some broad tips to engage your backers as you move forward.When the deadline hits, your project page is immediately ‘retired’ from active duty- a notice goes up with the end date and final funding amount. People can still watch your video and you can continue to post updates as the project progresses, which is great.Q | Innov8Social: Finally, do you have any tips for social entrepreneurs on what to do (and what not to do)  after raising funds on a crowd sourcing platform?A | Joe : Things don’t slow down when the campaign closes. Once you are lucky enough to reach your goal, you have to immediately switch gears and begin delivering on your side of the pledge.

Plan ahead for rewards fulfillment and make sure that you continue to give your backers the best experience possible. A pledge on Kickstarter is more than a purchase on your website and people are really vested in your success. They’re genuinely excited to hear about how the project is going and it is awesome to continue to interact with them afterwards.

It is amazing to have this whole new community of people who share our vision. We’ve received really touching emails from people who love their rewards packages and we’re looking forward to staying in touch with everyone who was a part of this project. Update your supporters!
It can feel overwhelming to realize that you need to a) keep up with your day-to-day work b) manage your rewards fulfillment and c) actually build the project you funded! Just hold onto the excitement you felt when you launched your project and remember that now you have an awesome group of people cheering you on!
Many thanks once again to Joe and the Yellow Leaf Hammocks team. We can’t wait to see the new hammock stand prototypes!