Business Partners and Startup Co-Founders: Please Slow Down…

By Dorene Lehavi, PhD

Of course, you are in a hurry to get your dream business up and running.  You want a partner or co-founder, and to get to market ASAP for a list of very good reasons.   Why wouldn’t you?   However, rushing into what is equivalent to getting married can lead you to the nightmare of losing it all.  There are huge mistakes that partner or co-founder seekers make by rushing into something that, in the end, could lead to disaster. So please slow down and consider this. We actually see this a lot at 1000 Angels, the private investor network that connects investors with startups. 

The technology, product and operations side of your business is only 20% of what you need to have.  Business schools tell you that the 80% is what they don’t teach…80% is about people.  Business is all about relationships with people. Investors, customers, employees, vendors, competitors, community, your families and others.  Where there are co-founders and partners who own and run the business, the relationship they have with each other is the key to its success.

The first huge mistake setting you up to be one of the 70% of failed business partnerships is, as you might have guessed, choosing the wrong partner.  

Let’s say you found someone with whom you clicked.  You spent “a lot” of time talking and discover that you have similar aspirations for a business.  Your excitement increased as you discovered how your dreams coincide and as a bonus you have complementary skills.   Your adrenaline is soaring, and you are sure that you have found your match.  You are both (all) in a hurry, so you ignore the red flags.  Your gut reaction is telling you to slow down or even walk away.  But you choose not to pay attention to that forewarning.  Instead, you prefer to move ahead because your desire to have the partnership and the business overpowers your ability to listen to your intuition.  

If long term success is the goal, having the right partner in business is as crucial as having the right partner in marriage.  We all are aware of the high divorce rate in marriage.  It is even higher in business partnerships.  In both cases, divorce can be avoided if we would take more care in choosing the right partner.  In some cases, it is not even true that the wrong partner was chosen, but rather that the partners don't maintain a healthy relationship.  

Be willing to slow down and take the time to get to know each other well by having essential conversations covering key issues.   Be transparent and use good communication skills to find out if you are compatible on core values, trustworthiness, personality, likability, work style, risk tolerance, long term vision and other crucial areas.  This should lead you to know if you have the basis to build the foundation for a successful business.  However, finding all of this out takes time.  It’s the equivalent of dating before deciding to get married.

Instead of approaching the conversations from the point of view of “what will I get from this person?” start from the point of view of “what can I give to this person?”. You should start talking first.  You can even mention having read this article.  Transparency means answering honestly to questions like why you want a partner and why someone would want you as a partner.  Since we all have our quirks and shortcomings, by sharing yours, you will be giving your potential partner permission to be open about theirs.  
 

Here are some guidelines to talk about:

  • What is the true reason you want a partner?  

  • What are your strengths and weaknesses?  

  • What do you think a partner would find most annoying about you?  

  • What in your personal life could interfere with your being present for the business? Are your spouse or parents supportive?

  • Do you have a history with other partnerships? What happened?  

  • Is this your only business?  What other interests do you have that could take your time and money?  

  • What is your financial situation?  Do you have obligations such as spousal or child support?  Are you caring for aged parents?

  • What contributions will you be making?

The point is that between partners, everything has to be out in the open. Obviously your first few conversations will not likely cover these personal topics.   It takes time to feel safe with someone new to be this forthcoming.  However, your potential partner or co-founder will be more likely to be open if you take the lead.

Surprisingly it’s not required that you have the same work style, for example, or even the same long term vision. The important point is to know it upfront and not be surprised and unprepared when one partner finds out that the other has an annoying work style…or in a year wants to sell because his long term commitment didn’t match yours.  What you must have is the willingness to talk about it early and work out these differences finding compromises and solutions that bridge the gaps.

Not everything can be worked out, but it’s better to know beforehand when you still can shake hands and walk away without having to face the pain of a downward spiral everyday until you ultimately break up to end the misery.


As you slow down in order to get to know each other and make progress in discovering that you share the important elements - mainly core values and commitment - your respect and trust for each other should be growing.  If that isn’t happening, definitely acknowledge this red flag and walk away now.

Dr. Dorene Lehavi has been coaching business partnerships for almost 20 years.  To learn more visit www.DoreneLehavi.com

Startup Investing: The New Trend in Alternative Assets

By Tim Hoghten

By definition Angel Investors are individual investors. But the data shows a rapidly growing trend in accredited investors investing together. This is something that we have experience at 1000 Angels, the private investor network that connects startups with investors. So how are sophisticated investors putting their money to work today?

Trending Investment Strategies

Global investor surveys have shown that since the crises of the early 2000s more affluent and sophisticated investors are choosing to invest in partnership with each other. This is in contrast to going it alone in direct investments or publicly traded REITs and stocks.

Wikipedia notes that “in 1996 there were about 10 angel groups in the United States. There were over 200 as of 2006.” In a report on startup investing and “How the Rich Invest” Forbes notes that the Angel Capital Association counted more than 330 active angel groups in North America as of 2013. While the Wall Street Journal claims “very few start-ups” received angel investment in 2007, Stanford Graduate School of Business, Center for Entrepreneurial Studies proclaims “90% of all see and start-up capital” comes from angel investors. Just 2% of startup financing actually comes from venture capital firms. But angel financing has been evolving thanks to ‘Super Angels’ and crowdfunding.

How To Find Deals

Angels have organized themselves in a number of formats, including:

  • Pooling funds as hybrid super angel-venture capital funds

  • Geographically; by gravitating to startup hubs and fertile environments for new ventures such as Silicon Valley, New York, Austin, Miami, and even SW Florida.

  • By attending investor pitch events at coworking spaces, conferences, and even on TV

  • Local social gatherings providing angel financing to local entrepreneurs, like Miami Soup

  • Online via platforms like 1000 Angels

Five Reasons to consider Investing through Online platforms

  1. Safety

  2. Due Diligence

  3. Enhanced Investment Performance

  4. Deal Flow

  5. Fun

Participating in startup investing as part of an online platform adds in all of the factors which may be missing for investors. Groups investing in multiple deals mean better diversification. That means safety in investing. They also attract more deal flow than solo investors.

When investing with a group of likeminded and qualified accredited investors, due diligence burdens can be shared. This is especially true with today’s crowdfunding platforms which pre-screen and vet proposals. A savvy angel network invested on the ground floor significantly elevates the potential of a startup too. It means a base of invested individuals that may both provide additional cash injections without causing dilution, along with more introductions and ambassadors, all pushing to make the venture a success.

Let’s not forget fun. It can be lonely as an angel investor. Even if you are at the ‘top of the world’ by all other standards. You may not always want to travel or find you fit in with the other angels in your neighborhood. However, the buzz and camaraderie of investing alongside other angels online can prove to be both more profitable, and fun.

In Summary…

Online platforms are trending. They can add a substantial opportunity for investors, boost the odds of success, and lift ROI. There are plenty of options for participating, even if you live remotely or are a full time global traveler. Plus; investing with others just makes it more meaningful and enjoyable.

Try it out…

 

Onevest Success Story: Recycled Guitars Shakes Up Industry

A Bohemian is a person, musician, or artist who lives by his or her own rules and believes in love, freedom, and truth.”
 

When you pair up an oil can with guitar strings, only good things can happen.  Just ask Adam Lee, co-founder of Bohemian Guitars.  The South African native along with his brother Shaun, launched Bohemian Guitars on Kickstarter in June of 2013.  Feeling the need to change up the musical instrument scene while also making an environmental impact, the brothers are definitely disrupting the industry with Bohemian Guitars.  Knowing they wanted to get to the next level, they chose Onevest to help them get there.

Bohemian Guitars offers a unique experience by providing a customized, great sounding, best of all, affordable guitar.  Inspired by the innovativeness of the local musicians in South Africa, Bohemian Guitars are constructed using old oil cans and recyclable materials.   Not settling for just offering guitars, they have expanded their product line to include custom guitar straps, carry bags, and cases.  This type of forward thinking has led to major partnerships including clothing store Urban Outfitters, the SXSW festival, and musicians Robert Plant from Led Zeppelin and Luther Dickson from the Black Crowes both have their own Bohemian Guitar.

They leveraged the Onevest platform to help raise a $600,000 Seed round, which closed in February of this year.  Adam sat down with us recently and gave us his personal insight and takeaways as a founder to his experience with Onevest and raising money in general.

Adam Lee

Adam Lee

Shaun Lee

Shaun Lee

Investors do not think about your business they way you do.  Every investor is different so do a little extra homework on them.  Also, just because someone has experience investing, does not mean they have experience investing in startups, so be prepared to explain  the terms of your deal.

Be patient because rounding up investments does not happen overnight.  The process of finding investors is not fast.  Using a platform like Onevest can help get you get in front of a large investor community.

Time management is extremely critical.  Raising money is a “full time” job so you need to be prepared. There is always work to do.  

Understand your business completely, especially the money component.  This is very important to investors.  Knowing the product is not enough.  

 

The future looks bright for the guys at Bohemian Guitars. They want to  keep the promises they made to themselves which include growing as a business and adapting to the times.  With the key partnerships they’ve built and guitars flying out the door, they are in great shape.  

You can follow Bohemian Guitars on their website, Facebook, and Twitter.  

Startup Investment 101: Investment Rounds Explained

By Michael Whitehouse

Investment rounds are an essential part of the startup investment journey. Something that we state to our members at 1000 Angels, the private investor network that connects startups with investors, is that If you are a new investor in the startup marketplace, then you will need to quickly familiarize yourself with each round. You will encounter them progressively as you negotiate a deal either with a startup founder, or as an investor looking to attract further capital to an existing organization. Either way, an understanding of each round and why it exists is critical.

Photo credit: http://businessenglishpod.com/

Photo credit: http://businessenglishpod.com/

The terminology used to describe these investment rounds can seem daunting, but it needn't be. At 1000 Angels we want to help new and seasoned investors as much as we can to find startup opportunities.  A big part of this is understanding the various rounds of investment out there so that they may be negotiated with ease and confidence.

With this in mind, let's take a look at some of the most common investment rounds seen in the startup sector, summarizing their function and why they're important.
 

1. Seed Investment

This is the first type of investment round on offer through a startup. It is a preliminary investment stage which is geared towards helping a startup founder establish the direction and goals of their business. The seed stage of any organization is clearly embryonic and is therefore more speculative than other rounds of investment. It is there to establish the startup as a going concern, in many cases going as far as to bring a product to market.

A seed investment should aim to achieve one of the following:

  1. Product Identification: A startup founder may have an idea about the type of product or service he/she hopes to develop, but seed investment is usually a big part of cementing design elements and settling on a defined product for launch.

  2. Marketplace Orientation: At a seed stage a startup may be looking to carry out research into available marketplaces, understanding the competition and how best to sell a product or service within that niche.

  3. Demographic Targeting: It may still be necessary to identify the specific demographic or target audience for a product or service. This might include market research and other exploratory measures to define this more clearly.

  4. Team Creation: There is the possibility that a seed investment could be used to establish a working team beyond the founder(s) of the startup. This could be needed in order to bring the right expertise needed to create or launch a product.

Seed investment is not always necessary as many startup founders will have much of the infrastructure in place before seeking capital. In some instances, however, this type of investment can be critical to bring a startup idea out of its infancy.
 

2. Series A Investment

This type of investment is often the first encountered when the seed stage does not require outside funding. At this juncture most startups have a strong defined idea of what the central goal is behind any product or service and may even have launched them commercially.

Series A investments should achieve one of the following:

  1. Distribution: Optimizing the way that advertising is disseminated and products/services are distributed is a key part of series A investment. This can lower overall costs or increase sales; hopefully both.

  2. New Markets: Launching a successful product in a new region can be costly. This is why series A investment is often sought by startup founders. New markets can be opened up using this injection of capital, engaging with different demographics and furthering brand visibility in the process.

  3. Stage 2: The primary function of a series A investment is usually to take a company to the next level. Capital raised during this round is often used to implement a new business plan geared towards meeting defined business goals. This could include launching a new product or reaching a new sales target.

  4. Shortfall: Series A investment can also be used to make up for a shortfall in capital. A startup may still be a promising investment opportunity, but unforeseen expenses can use up available funds, and so another round of investment might be required to offset this.

 

3. Series B Investment

By the time Series B investment is being actively pursued a startup is usually well on its way to being a truly established business. Production is well managed, advertising in in full flow, and customers or users are actively purchasing an associated product or service as planned. While scalability is a factor in Series A investment, here it is the main focus. This includes:

  1. Team Expansion: As the company grows it is likely that more employees will be required in order to ensure smooth running of the business. This may involve an initial outlay beyond using sales to pay for salaries. It is likely that employees will need new equipment, office space etc., in order to perform effectively.

  2. Globalization: A startup might be selling in one or two regions, but this is often the stage where capital is needed to establish a company on the global stage. Trading in every region can require a significant outlay depending on the nature of the business, and this is exactly why Series B investment rounds exist.

  3. Acquisitions: If a startup has grown sustainably, it may be in a good position to bolster its operations through acquiring another business. This could be in the form of a competitor, or perhaps a related technology or patent which could be incorporated into the company. Rather than using its own reserves it can be beneficial to pursue new investment to fund such an acquisition or merger.

 

4. Series C Investment and Beyond

There is no technical limit to the number of investment rounds a startup can pursue. This depends heavily on any anti-dilution agreements previous investors have acquired, ensuring that their stake is never watered down. As each investment round progresses more and more equity from the company is released, so they are normally not entered into lightly from both investor and founder perspectives.

Understanding the various machinations of each investment round will help a potential investor decide on the most appropriate course of action. With the information contained in this article hopefully such rounds will no longer appear confusing, and so can be entered into confidently and with purpose.

The foregoing article is for educational purposes only and should not be construed as legal advice.  The information described in the above article is just an example of fundraising rounds and may not apply in every deal.  There may be overlap between specific rounds.  The round terms themselves, “Seed,” “Series A, B, C,” etc., may also be interpreted differently by founders, investors, and institutions. Prospective investors should carefully review the documents of any offering which they are considering for purchase and should consult with their legal counsel and professional advisors.

8 Ways to Identify the Perfect Startup Investment

By Michael Whitehouse

If you are considering investing in a startup company offline or online with platforms like 1000 Angels, a private investor network that connects startups with investors, the sheer number of what’s available can be both daunting and comforting. On one hand there are so many startup founders out there that it is very difficult to identify which ones have the best chance of success and producing a profit for investors. On the other hand, the large quantity can be looked at as a sea of opportunities just waiting to be explored.

Photo credit: http://www.valley.bc.ca/

Photo credit: http://www.valley.bc.ca/

But how can you identify the right investment opportunity for you when facing such an onslaught of possible avenues? For even the most experienced of investors this can prove difficult. There are many startups out there; but the key is separating those that meet your investment criteria, from those that do not.

With this in mind, let's take a look at 8 key aspects of the “ideal” startup. Most startups will not meet all 8 criteria, but these are considerations when making your investment decision.  There is no guarantee that an investment will meet any of these objectives, rather objectives that you as an investor want to think about when considering an investment.
 

1. Consumer Need: An important aspect of any startup is whether a resulting product or service will sell or solve a particular problem.  A slick business plan and charismatic founders will help, but the bottom line is that if the product does not sell and generate revenue, it is useless to you as an investor. Of course no product or service is a sure thing, but what is certain is that only those which fulfill a demand have any chance of making it. Does the startup offer something people genuinely want? Will it solve some need which is not already being met? If the answer is yes, then there is a chance that such a startup could prove successful when finally launched.

2. Exit Strategy: Does a startup have a clear exit strategy in place? In other words, does the business have a definitive timetable or pathway towards returning an investor's money alongside an agreed portion of generated revenue? It's important that you as an investor know how you are going to make your money back with a suggested timetable in place. Without this there is little point providing financing because there is no direction or plan to help you generate returns.

3. Clear Ownership: As an investor you must have a comprehensive understanding of who owns the startup and all of its intellectual properties. If there is any question regarding patents, copyright, or ownership of assets then investment should be withheld until those issues are legally settled. If they are not then your investment could prove worthless.

4. Management: Depending on how “hands-on” you wish to be as an investor, having a reliable and astute management team in place to oversee a startup is essential. Without this, such a project cannot thrive, operate efficiently, or meet its goals on time. In some cases a new management team can be brought in as part of an investment deal, but founders often prefer to keep their existing talented team in place. Some startup founders have great ideas and big dreams, but if they lack the administrative talents to make them happen, you as an investor could pay a hefty price.

5. Sustainability: Some startups by their very nature may be “flash-in-the-pan.”  In some circumstances this might still prove to be a solid investment should there be a swift exit strategy in place, but ideally a startup should be able to demonstrate that it can be sustainable; a brand which will generate profits for many years. If the startup cannot demonstrate sustainability, then there won't be many investors willing to purchase that equity from you, at least not in a way which will maximize profits.

6. Standout: Unless uniquely innovative, the chances are a startup will have competitors. These could already be operating or trying to launch into a new niche at the same time. A startup must therefore demonstrate why it stands out from the crowd; showing why it will be a strong competitor to other similar companies within that niche. If the startup cannot separate themselves, then it may not be wise to invest in such a project.

7. Relationship: Startup founders must be willing to work with investors and be communicative at all times. A project might have a great idea at its heart, but any working or financial relationship which may become fiery, destructive, or stressful, may not be worth investing in. There has to be a mutual respect between founders and investors, each knowing their role in the startup and willing to build constructive relationships throughout.

8. Expertise: If a startup is the product of an accelerator program, incubator group, or can access the advice of market experts, it is may start with a solid foundation, This knowledge can be used as a safety net, providing peace of mind for investors knowing that advisers with the relevant expertise and skill-set are available to help steer the startup in the right direction, but does not guarantee execution by the company.


As stated above, most startups won't possess all of these facets, but a strong combination of a few of them may produce a successful investment opportunity.

Is Startup Investing Right For You?

By Tim Houghten

Startup investing may be right for the many individuals in the U.S., if it is done well.

Why invest in startups offline or online via platforms like 1000 Angels? What role should startup investing play in your financial plan? What’s the smartest way to embrace this type of investment?

Photo credit: forbes.com

Photo credit: forbes.com

Three Reasons to Add Startups to Your Portfolio Today:

  1. Growth

  2. Diversification

  3. Impact investing

Replicating Success

Matt Theriault, host of the Cash Flow Savvy podcast on iTunes, poses that if you emulate what the wealthiest are doing, you should get the same results, and vice versa.

So what are the wealthy doing that is working? A quick review of the 2015 Forbes list of the richest billionaires shows that virtually all members are invested in businesses in some aspect. A huge percentage have invested in startups or have launched their own. The 2015 Midas List highlights this even further.

Then just look at what the most notable individuals, investors, companies, and fund managers are investing in today. Whether you are a fan of Jim Goetz, Mark Cuban, Barbara Corcoran, Warren Buffett, Peter Thiel, Google, or Facebook; there is a common thread of investing in or acquiring startups and growing business ventures.

The New York Times reports that while many individuals may not be aware of it, some of the  performance of their 401ks and mutual funds might already be credited to startup investing. Big name funds like Fidelity Investments, BlackRock, and T. Rowe Price have already been incorporating shares of startups like Uber, Pinterest, and Airbnb into their pools.

Direct investments to private companies give individual investors more control versus pooled vehicles, may reduce investor expenses, and when purchased through self-directed IRAs, may be a tax efficient way to allocate.

A Quick Caveat

While the new SEC Regulation A+ has cast aside the velvet rope to allow more individuals to participate in the benefits of startup investing, and more ventures might get to IPO faster, every new venture has its risks. Early Stage investing across a number of startups may assist in reducing risk, and may be less risky than trying to build your own business from the ground up. But there are no guarantees of multi-billion dollar valuations and IPO exits.

Startup Investing Done Right

Here are five tips to leap the laggards to successfully invest in startups for maximum results and safety:

  1. Explore the benefits of angel groups and networks in your area.

  2. Hone in on curated and pre-vetted startups for investment opportunities .

  3. Dedicate an appropriate percentage of your portfolio based upon your personal risk tolerance

  4. Find a startup investing platform that provides convenience, efficiency and effectiveness.

Read this advice for being a successful early stage Investor.


This site is operated by Onevest Corporation. Onevest does not give investment, legal or tax advice. All securities listed herein are offered through North Capital Private Securities Corporation ("NCPS"), a registered broker-dealer, member FINRA/SIPC. Onevest has taken no steps to verify the adequacy, accuracy, or completeness of any information presented herein. By accessing this site and any pages thereof, you agree to be bound by the Terms of Use and Privacy Policy. Only Accredited Investors can invest in securities offerings posted on this website. All accredited investors using the Onevest platform must be verified as to their accredited status and must acknowledge and accept the high risks associated with investing in privately held companies and early-stage ventures. These risks include holding an investment for periods of many months or years with limited ability to resell, and the risk of losing your entire investment. You must have the ability to bear those risks. To the fullest extent permissible by law, neither Onevest nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising out of any error or incompleteness of fact or opinion in the presentation or publication of the materials and communication herein. Hyperlinks to sites outside of our domain do not constitute an approval or endorsement of content on the visited site.

5 Tips to Manage Relationships With Portfolio Companies as a Startup Investor

By Michael Whitehouse

You've found that perfect startup opportunity on 1000 Angels, the private investor network that connects startups with investors, or somewhere else, decided to invest an amount in the project, and now it's time to help that investment flourish. But just how do you move forward as an investor and maximize your impact on a startup? How can you ensure that you are having a positive effect rather than a detrimental one?

Photo credit: http://blog.topazlabs.com/

Photo credit: http://blog.topazlabs.com/

The key is to foster a positive relationship with the founders of the startup directly. This doesn't mean a personal one, but rather a relationship built on a clear understanding of what everyone brings to the table. Depending on how hands-on you intend to be as an investor, you'll need to recognize that your startup will only operate effectively if you make best use of everyone's talents. It may be that you can only contribute in a small manner, or, if you're lucky, the company runs effortlessly and doesn't require your input at all. Regardless, your relationship with the founders of the company and any management team in place, is going to be pivotal in ensuring your investment has the best possible chance of success.

With this in mind, let's take a look at some key areas where you as an investor are likely to play a role.

Regular Communication

As an investor you'll want to know that your finances are being used effectively. This requires communication with those managing the startup. Some investors will be happy to interact with management a few times a year, while others will want to keep a handle on things and stay in the loop every week. Whichever approach you take, open, frank, and respectful communication will go a long way to avoiding any disappointments or misunderstandings regarding the direction of the project.

Communication creates trust and ensures that everyone is on the same page, pulling in the same direction. As an investor there may be times that you disagree with a management decision, and in many cases you might be unable to do much about it if you do not have a controlling stake, but even in this situation at least you can be aware of where your money is being spent and how things are proceeding. All you can do is give your input, and the only way that input can be truly effective is if it is based on an informed opinion, one completely aware of what is going on within the business itself.

Business First

Unless you own the majority of a startup – and most investors are not in this position – it is important to recognize that, while you have invested money in the project, that you are not running it. The founders who first created the company or had that amazing product or service idea which attracted your interest, generally have a good idea of how to run the business and how to steer the ship. This is where you will have to put your ego aside and put business first. You might want to be involved in every decision, but you have to be honest – if the management in place are more knowledgeable about an associated industry or the daily workings of the business, the chances are they will be better at managing it than you will. 

The above, however, is not always the case. In some circumstances a management team may be inadequate or not up to the task. If that happens, then as an investor you can raise your concerns, but even in this circumstance it will result usually in bringing in a new manager to oversee the project. Ego is one of the root causes for a business to flounder, so don't get caught in the trap. Know when to step in and get involved, and know when to get out of the way and let others do their jobs. Always put the business in its entirety before any pride or ego stops your investment from being a success. 

Set Goals

We've talked about this previously in our article about how startup founders can better manage their time, but setting goals can be something which will set your mind at ease as an investor as well. By having a schedule and a clear plan of milestones for the business to meet, you can better measure where performance is high or low. It's important to remember, however, that these goals should be decided on collectively, especially if you have little knowledge of an industry or the workings of the business. It may be that something which you believe should take a short time, actually requires more substantial allocation of resources. What's important is to come to an agreed, fair, and reasonable timetable for goals. If, one the other hand, you have the experience and knowledge required to make a judgment on timescales, then absolutely make your voice heard.

A goal could be something which could take a year, a quarter, or a day to reach. Managing this progression brings on nicely to progress updates.

Progress Updates

Tying together our previous points about communication and goal-setting, progress updates are a great way to set everyone's minds at ease. They create a sense of urgency and feeling that the business is moving forward, even when accomplishments are perhaps incremental rather than earth-shattering. If you have a business goal which will take 3 months to achieve, receiving regular updates from the business about the progress each week or month will allow you as an investor to know whether a milestone is actively being worked towards.

A set schedule for progress updates can really make a difference and facilitate great organizational communication. It can help identify where there is a problem months before it would otherwise rear its ugly head. As an investor, the real balance to strike here is between receiving so many progress updates that they become redundant or even annoying to founders and management, and not receiving enough to get an accurate idea of where the business is heading. Sensibly regular progress updates which genuinely inform are what should be aimed for.

Positive Relationships are Productive Ones

The above mentioned aspects of investor-management relationships are ones which should be looked on as critical. You, as an investor, should try to foster a positive relationship with those running any startup you are connected to, in a way which uses your talents, and theirs; allowing the business to succeed off the back of good communication, planning, and use of available skill-sets.


This site is operated by Onevest Corporation. Onevest does not give investment, legal or tax advice. All securities listed herein are offered throughNorth Capital Private Securities Corporation ("NCPS"), a registered broker-dealer, member FINRA/SIPC. Onevest has taken no steps to verify the adequacy, accuracy, or completeness of any information presented herein. By accessing this site and any pages thereof, you agree to be bound by the Terms of Use and Privacy Policy. Only Accredited Investors can invest in securities offerings posted on this website. All accredited investors using the Onevest platform must be verified as to their accredited status and must acknowledge and accept the high risks associated with investing in privately held companies and early-stage ventures. These risks include holding an investment for periods of many months or years with limited ability to resell, and the risk of losing your entire investment. You must have the ability to bear those risks. To the fullest extent permissible by law, neither Onevest nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising out of any error or incompleteness of fact or opinion in the presentation or publication of the materials and communication herein

"Money is Local, Impact is Global" for Angel Investing

By Michael "Luni" Libes

In the traditional world of early stage, Angel and VC investing, money is local. Studies show that over 80% of funding at Angel groups and Series A VCs goes to businesses in the same city/region as the funders.

Over in the impact investing space, this rule is not true. Socially and environmentally conscious entrepreneurs are tackling global, planet-scale issues, often well outside the investment hotbeds of San Francisco, New York City, Boston, Seattle, Boulder, and Austin. No city stands out as a leader across cleantech, green, community, and bottom billion targeted startups, and as such, entrepreneurs are not flocking to any one city to find talent or funding.

The diversity of socially conscious entrepreneurs seeking assistance can be seen in this map of applications to Fledge, the conscious company accelerator

The diversity of socially conscious entrepreneurs seeking assistance can be seen in this map of applications to Fledge, the conscious company accelerator

Due to this diversity of geographies for entrepreneurs and their target customers, impact investors can’t sit back and only look at deals in their local region. Instead, we see groups like the Element8 Angels in Seattle funding deals across the country, and syndicating deals with other Angel groups in other cities. Plus we see groups like Investors Circle, which is national in nature, with members spanning coast to coast, absorbing smaller local groups like the Colorado Impact Angels.

As much as we in Seattle would like to be the epicenter of impactful enterprise, the trend of equity crowdfunding and international programs like Fledge and Kick are no doubt only going to further stretch the reach of funding across national borders until the dealflow is truly global.

This post was originally published on the blog of Michael “Luni” Libes. Read the original post here. Luni will be a panelist on Onevest’s upcoming webinar with the Angel Capital Association on Impact Investing on Wednesday, April 8th.

Luni is a 20+ year serial entrepreneur, (co)founder of six companies.

His latest startup is Fledge, the “conscious company” accelerator, and Kick, a pre-accelerator, where he helps new entrepreneurs from around the world navigate the complexities between idea and customer revenues.

In addition, Luni is Entrepreneur in Residence and Entrepreneurship Instructor at Pinchot University and an Entrepreneur in Residence Emeritus at the University of Washington’s CoMotion, the center for innovation and impact.

Luni is author of The Next Step series of books, guiding entrepreneurs from idea to startup and The Pinchot Impact Index, a way to measure, compare, and aggregate impact.


This site is operated by Onevest Corporation. Onevest does not give investment, legal or tax advice. All securities listed herein are offered through North Capital Private Securities Corporation ("NCPS"), a registered broker-dealer, member FINRA/SIPC. Onevest has taken no steps to verify the adequacy, accuracy, or completeness of any information presented herein. By accessing this site and any pages thereof, you agree to be bound by the Terms of Use and Privacy Policy. Only Accredited Investors can invest in securities offerings posted on this website. All accredited investors using the Onevest platform must be verified as to their accredited status and must acknowledge and accept the high risks associated with investing in privately held companies and early-stage ventures. These risks include holding an investment for periods of many months or years with limited ability to resell, and the risk of losing your entire investment. You must have the ability to bear those risks. To the fullest extent permissible by law, neither Onevest nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising out of any error or incompleteness of fact or opinion in the presentation or publication of the materials and communication herein.

Hyperlinks to sites outside of our domain do not constitute an approval or endorsement of content on the visited site.

How Startup Founders Can Better Manage Their Time

By Michael Whitehouse

Photo credit: huffpost.com

Photo credit: huffpost.com

As we tell our founders at 1000 Angels, the private investor network that connects startups with investors, time management is an important component of any business, but when it comes to launching a startup it is even more critical. Excitement and passion alone won't fuel your project – you need structure to determine how and when to achieve a goal. Without that, your startup is a rudderless ship from the outset. When time is of the essence for a new initiative to establish itself, a flawed or absent approach to time management can prove to be fatal.
 

Manage Your Time, Solve Your Problems

Time management isn't just about being “on time”; it's about directing yourself and your employees towards solving issues for your business in a systematic and organized way. If your startup is still a one-person show, your time management skills are going to be focused on what you alone can achieve, what problems need to be addressed, and how long it will take you to do so. If you have employees or are part of a team, then you will be incorporating time management techniques into delegating tasks and charting a course for your business. For some, you'll be doing both.

There are many different approaches to time management, but we're going to focus on a six-step plan to get your startup on track. It could be that you are naturally well organized and that your business already runs efficiently, but there are always improvements to be made. Stagnancy and complacency are precursors to failure, especially at this early stage. Alternatively, you could be big on passion and ideas but lack appreciation of time as a valuable resource. In this case, time management is even more critical to you.

Whatever your situation, the six steps explored below are sure to increase your business’ or project's efficiency, help you meet your goals quicker, and contribute to maintaining healthy growth throughout your organization. Most importantly, they'll help you launch your product or service as quickly and effectively as possible.
 

Step 1: Be Honest

Throughout this entire process you will need to be honest. This involves being completely clear about three things:

  • What your habits are and what you are capable of.

  • What your team’s strengths are.

  • What is achievable in a given time-frame.

By knowing what your habits are you can work within them to increase your efficiency. Perhaps you work better at night, or your schedule dictates a need for getting the most important tasks out of the way in the first few hours of the morning – you can use this awareness to maximize your time, focusing on when you are most productive. There is one caveat here: if you perceive a habit as a genuinely negative trait, like being easily distracted from work, then that is something of which you must be mindful and remove from your routine. Also, be honest about your capabilities. If it will benefit the business to delegate or outsource a task to someone else, then do not be afraid to do so. Learning new skills and pushing yourself is a positive pursuit, but when time is of the essence, know where your own capabilities are best employed.

What are your team’s strengths? There is little point in delegating a task to a staff member whose talents are better suited elsewhere within your startup – in fact, it’s counterproductive. Try to assess the individual strengths of each team member, and then delegate those tasks to them. This will speed things up markedly.

The last point here is an essential one: what can be achieved in a given time-frame? Unreasonable targets for you or your staff are a sure way to undermine your startup. Miscalculating this or being overly optimistic can seriously impede your schedule when things start running substantially over. Optimism and ambition is important in driving performance and persistence, but be honest and realistic with yourself about how long a task will take and you can better prepare and schedule other goals around it.
 

Step 2: Weekly Agenda

Your startup should already have a business plan outlining major commercial objectives, but what it also needs is a weekly battle-plan to supplement it. An agenda which is revised every seven days mapping out the short term issues faced by your company, how they will be tackled, and a reasonable time-frame for doing so is valuable. A great approach is to set aside 30 minutes to an hour every Friday or weekend to go over what needs to be achieved within the next seven days.

It is important to keep in mind that these shorter, 7 day plans take you and your startup closer to the big picture – your end goal. Whether it is to establish your product in a specific market, engage with a new demographic, or just launch your product or service; your weekly agenda should always be set with the bigger picture in mind. Break this larger goal into smaller ones so it seems more manageable, and you can more effectively navigate the process. This brings us to prioritizing your agenda.
 

Step 3: Prioritize

There is no point in having a haphazard approach to your weekly agenda. This can result in slower progress from a lack of focus. Even worse, it could mean that you complete a task out of order without taking into consideration how each task might benefit the one which succeeds it. Take your agenda and rank the items from least important to most important. Then order this list in terms of which tasks would be better solved first to make way for subsequent ones. Perhaps it's more important to have a business logo designed before progressing with funding drives, for example. This should give your agenda a great balance between importance and practicality, allowing you to work through the problems in a systematic, effective way.
 

Step 4: Find Your Time Vampires

Time management isn't just about organization, it's also about identification – figuring out the elements of your business which are hindering progress. This could be something as simple as a  scheduling conflict, or something more serious like a manufacturing issue. In many instances it will be how tasks are undertaken, and how much time is given to administration.

How long do you spend answering emails or engaging on social media with potential customers and investors? Could this be streamlined? Are members of your staff unable to complete tasks quickly because of the software they are using? In some extreme circumstances you might find entire aspects of your startup's workday which need outright removal. No matter what facet of your business is taking time away from your agenda, there will always be a way to increase efficiency.

Be wary of organizational processes which are unimportant and take up too much time. In order to identify the time vampires in your routine or organizational setup, keep a log of activities for a week and see how long tasks are taking. If a task seems to be taking unreasonably long, then it probably is. You might also identify tasks or habits which take up too much time and are entirely unnecessary.
 

Step 5: Innovate

We mentioned software issues in the last step, and it's a salient point here – always innovate. This doesn't mean you need to constantly upgrade software or implement the next organizational tool like Trello if your startup doesn't need it; but you should always be on the lookout for new ways of doing things. Perhaps an upgraded software package will allow you or your staff to complete tasks faster, or implementing cloud technology into your projects could help team members work more closely. Maybe you will find a new time management technique which doubles productivity on a given task – whatever the innovation, always be aware that innovation is the lifeblood of sustainability. Furthermore, your competitors could be making use of something you have never even heard of, so it is important to try and stay ahead of the curve to remain competitive.
 

Step 6: Pomodoro Technique

The Pomodoro Technique is one of many time management approaches out there. When used it can exponentially increase productivity by keeping you and your staff alert, while allowing you to break larger tasks into smaller ones. Named after an Italian kitchen timer, the Pomodoro Technique simply involves working for a set period, usually 25 minutes, followed by a 5 minute break. Repeat 4 times then take a 20 minute break. This approach is used by freelancers and businesspeople around the world to get the most out of their working time. First of all, the Pomodoro Technique makes larger tasks seem less daunting by allowing you and your staff to tackle them one 25-minute session at a time. Secondly, you are never far away from a break, even if it is just 5 minutes, and is enough to seriously energize you while keeping the task from becoming stale.

There are plenty of free pomodoro timers available for PC, MAC, iOS, and Android. This is a time management technique which has been used throughout the world since the 1980s, and it has endured for one simple reason – it works.
 

Time Management is Essential

Time management is a skill in of itself, and one which needs constant amendment and dedication. What's certain is that implementing the steps mentioned above, along with other time management approaches, can significantly increase what you, your team, and your startup can achieve in a short space of time.

Combine your passion and business acumen with time management, and your company will have a much better chance of success.


This site is operated by Onevest Corporation. Onevest does not give investment, legal or tax advice. All securities listed herein are offered through North Capital Private Securities Corporation ("NCPS"), a registered broker-dealer, member FINRA/SIPC. Onevest has taken no steps to verify the adequacy, accuracy, or completeness of any information presented herein. By accessing this site and any pages thereof, you agree to be bound by the Terms of Use and Privacy Policy. Only Accredited Investors can invest in securities offerings posted on this website. All accredited investors using the Onevest platform must be verified as to their accredited status and must acknowledge and accept the high risks associated with investing in privately held companies and early-stage ventures. These risks include holding an investment for periods of many months or years with limited ability to resell, and the risk of losing your entire investment. You must have the ability to bear those risks. To the fullest extent permissible by law, neither Onevest nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising out of any error or incompleteness of fact or opinion in the presentation or publication of the materials and communication herein.

Hyperlinks to sites outside of our domain do not constitute an approval or endorsement of content on the visited site.

 

New SEC Regulation A+: Everything You Need To Know

Q&A with Sam Guzik

Photo credit: huffpost.com

Photo credit: huffpost.com

At 1000 Angels, the private investor network that connects startups with investors, we have been monitoring closely the new regulatory landscape for startup fundraising. The following is intended to provide basic information about the new Regulation A+, adopted by the SEC on March 25, 2015, which is expected to become effective in early June 2015. It is not intended to provide legal advice. Please consult with your attorney's for specific counsel regarding the appropriateness of Regulation A+ for your company, and the corresponding rules and filing requirements.

This Q&A with securities attorney, Sam Guzik, addresses the regulation promulgated by the SEC under Title IV of the JOBS Act of 2012, now also designated by the SEC as Tier 2, and commonly referred to as Regulation A+.
 

Who is Eligible to Use Regulation A+?

Any U.S. or Canadian company that has not been fully reporting public immediately prior to filing with the SEC is eligible to take advantage of Regulation A+.
 

When Can I Use Regulation A+?

The rules were approved by the SEC on March 25, 2015, and will become effective 60 days after the SEC publishes the rules in the Federal Register, normally a delay of one to two weeks will apply. So these rules are expected to be effective in the early part of June 2015.
 

How Much Can a Company Raise?

Any amount up to $50 Million in a 12-month period may be raised in Regulation A+ offerings. However, money raised in other types of offerings, such as private placements, are not included in this $50 Million 12-month cap.
 

Can the Company’s Current Shareholders Sell their Shares in a Regulation A+ Offering?

Yes. But the aggregate amount sold by the shareholders who are “affiliates” may not exceed $15 million in a 12 month period. And for the initial Regulation A+ offering and during the first year following the company’s initial Regulation A+ offering, there is an additional limitation: selling shareholders may not account for more than 30% of the total dollar amount offered in the Regulation A+ offering. The aggregate amount sold by the Company and the shareholders may never exceed $50 Million in a 12 month period.

Note – Shareholders who are not affiliates and have held their shares for at least one year will generally be able to sell their shares under SEC Rule 144 without the need for any registration, though there may be some additional hoops to jump through.
 

Do I Need to Register the Offering With the SEC?

Yes. You will need to file an Offering Statement (Form 1-A) with the SEC, which will be reviewed by the SEC for compliance with SEC rules, similar to a traditional Registration Statement for an IPO.  The Regulation A+ securities may not be sold to the public until the SEC approves the Offering Statement. The Offering Statement includes the Offering Circular required to be provided to Investors.

All filings by a Regulation A+ company are done on the SEC’s electronic filings system, known as EDGAR.
 

What Type of Financial Information is Included in the Offering Statement?

Audited Annual Financial Statements must be provided for the two fiscal years prior to the year of filing. Financial statements must be dated not more than nine months before the date of filing or qualification, with the most recent annual or interim balance sheet not older than nine months. If interim financial statements are required, they must cover a period of at least six months.

Financial statements must be prepared either in accordance with GAAP or PCAOB standards.
 

What Type of Non-Financial Information is Required in the Offering Statement?     

The prospectus type disclosure is contained in Part II of the Offering Statement, referred to in Regulation A+ parlance as the Offering Circular. The required information is similar to what would be included in a traditional IPO registration statement, but the level of detail is reduced to scale to smaller issuers.  This information includes such items as risk factors, dilution, the plan of distribution, selling security holders, if any, use of proceeds, business operations, management’s discussion and analysis of the presented financial information(MD&A), identification of directors and executive officers, compensation information, ownership information, and related party transactions.
 

Who is Eligible to Audit the Financial Statements?

Unlike a fully reporting public company, a Company’s independent auditor need not be registered with the PCAOB.
 

Will the Company be Required to Register its Offering with any State?

No. A major feature of Regulation A+ is that companies that qualify their securities with the SEC are exempt from state “Blue Sky” laws. However, some states still may require notice filings and states retain jurisdiction to enforce certain rules, including those requiring that offers and sales are not made through misrepresentations or omissions.
 

Can a Company Solicit Non-Binding Indications of Interest Before Preparing and Filing an Offering Statement with the SEC?

Yes. The SEC rules allow a company to “test the waters” to solicit interest in the proposed offering before any filings are made with the SEC. This is an important feature of Regulation A+, as it provides an opportunity to reduce the risk of an unsuccessful offering before incurring significant expenditures for attorneys and accountants.
 

Will the Company’s Offering Statement be Available to the Public as Soon as it is Submitted to the SEC?

The SEC’s rules allow a private company to submit its offering statement privately so that it will not be visible to the public until a company determines to proceed with the offering.
 

Who Can Invest in a Regulation A+ Offering?

All investors, accredited and unaccredited, are eligible to purchase securities in a Regulation A+ offering. If a company lists on a national exchange such as Nasdaq immediately upon commencement of the offering, there are no limitations on how much may be invested in the offering. If a company does not list on a national exchange, unaccredited investors will be limited to the greater of 10% of their income or net worth (exclusive of a principal residence), whichever is greater. There are no investment limitations for accredited investors.  And there are no investment limitations for shares purchased after the offering in the secondary market.
 

Will the Shares Sold in a Regulation A+ Offering Be Freely Tradable?

Yes, unless the purchaser happens to be an “affiliate” of the Company. Being able to sell freely tradable shares is one of the major advantages of a Regulation A+ offering.  Typically, shares sold privately in an unregistered transaction are generally not freely tradable and reflect a discounted price to the company reflecting this non-liquidity. And it is generally more difficult for a Company to sell shares which are not immediately transferable, especially early stage companies where there is no secondary trading market.  So the ability of a company to sell freely tradable shares is one of the major benefits of Regulation A+ when compared to selling shares privately in an unregistered transaction.
 

Where Will Regulation A+ Shares Trade?

This will in most cases be determined by the Company.  I expect that the large majority of Regulation A+ companies will not initially meet NYSE or Nasdaq listing requirements. Typically a company’s shares will be eligible for listing on the OTC Markets, which has a three-tiered market structure. Other alternative markets are expected to develop in the coming months and years to accommodate smaller, early stage public companies.
 

Will the Company be Required to File any Reports with the SEC after its Offering Statement is approved?

Yes.  Regulation A+ requires companies to file periodic reports, though with less frequency and detail than a fully reporting company. A company must file an annual report (Form 1-K) with audited financial statements and a semi-annual report (Form 1-SA) with six months of reviewed financial statements. A company must also file reports for specified material events within four business days of their occurrence (Form 1-U).
 

If a Company Takes Advantage of Regulation A+, How and When Can it Become a Fully Reporting Company and Move up to a National Exchange?

As long as a company meets the listing requirements of a national exchange, such as Nasdaq or the NYSE, a company can “uplist” at any time after its initial Regulation A+ offering by making an additional filing with the SEC to register as a fully reporting company.  National exchange rules require that a company become fully reporting as a condition of listing.  It is also possible for a company that meets exchange listing requirements to list simultaneously with the initial Regulation A+ offering.
 

When is a Regulation A+ Company Required to Become a Fully Reporting Company?

Generally, when any company has (1) more than 500 unaccredited shareholders of record, or 2,000 shareholders of record, and (2) at least $10 million in assets, it is required to file periodic reports with the SEC (e.g. Form 10-K’s and 10-Q’s). Note that this is calculated based upon record ownership of the shares, not beneficial ownership. If the shares are registered with a broker in “street name”, they are typically aggregated with other shareholders of that firm and will, therefore, be counted as a single beneficial owner.

As one of the benefits of being a Regulation A+ company is lighter, less costly ongoing reporting than a fully reporting company, the SEC has carved out a further exception for companies who engage the services of a registered transfer agent and remain current with their Regulation A+ reporting obligations. A Regulation A+ company which exceeds the traditional reporting thresholds will nonetheless retain the ability to continue with the lighter reporting regimen so long as it has a “public float” (excluding the shares of affiliates) with a market value of less than $75 million or, in the absence of a public float, revenues of less than $50 million as of its most recently completed fiscal year.

A Regulation A+ company which triggers the full reporting thresholds still has a two year transitional period before it must begin to file as a fully reporting company.
 

Is Regulation A+ Right for You?

Regulation A+ provides a very useful avenue for companies who have a need or desire for liquidity in their shares and are far enough along in their business development so that they have the proper infrastructure to meet the ongoing responsibilities of being a public company.  At the least this will entail having the full time services of a financial officer who is knowledgeable and experienced with SEC accounting rules. And the burden on a company to address investor relations will expand by reason of a larger investor base and an ongoing secondary market.

But make no mistake about it.  This is not the traditional Kickstarter-type crowdfunding model. It ought not to be undertaken without consulting with experienced legal and financial professionals. Operating as a public company is a serious, long term undertaking. And if the business is managed properly, being a public company can provide greater access to capital, shareholder liquidity, brand recognition and often an increase in the company’s market valuation.
 

How Could This Impact Equity Crowdfunding?

This is a question better answered by in a book, not an FAQ.  But a couple of important points.

From a financial point of view, many shareholders who have invested in companies who have successful exits in a Regulation A+ offering can be expected to recycle their capital back into the startup ecosystem. A portion of this will find its way to companies crowdfunding under a non-SEC registered equity crowdfunded raise. 

And second, I believe the bold implementation of Regulation A+ by the SEC, coupled with a Republican-controlled Congress means that non-registered equity crowdfunding will become a reality in 2015 with new, smarter legislation.

Please bear in mind that this information is general in nature, and covers a highly technical area. So it is not intended as legal advice.

 

About Samuel S. Guzik

Sam Guzik has more than 30 years as a corporate and securities attorney, both in large law firms and in his own firm founded in 1993. He is a valuable resource to entrepreneurs with startup ventures, as well as development stage and seasoned companies seeking the most current ways ways to access equity markets, including streamlined registered public offerings under SEC Regulation A, reverse mergers and crowdfunding. He also has a great deal of expertise in assisting public companies with exchange listings, corporate governance, and ongoing SEC reporting obligations.


This site is operated by Onevest Corporation. Onevest does not give investment, legal or tax advice. All securities listed herein are offered through North Capital Private Securities Corporation ("NCPS"), a registered broker-dealer, member FINRA/SIPC. Onevest has taken no steps to verify the adequacy, accuracy, or completeness of any information presented herein. By accessing this site and any pages thereof, you agree to be bound by the Terms of Use and Privacy Policy. Only Accredited Investors can invest in securities offerings posted on this website. All accredited investors using the Onevest platform must be verified as to their accredited status and must acknowledge and accept the high risks associated with investing in privately held companies and early-stage ventures. These risks include holding an investment for periods of many months or years with limited ability to resell, and the risk of losing your entire investment. You must have the ability to bear those risks. To the fullest extent permissible by law, neither Onevest nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising out of any error or incompleteness of fact or opinion in the presentation or publication of the materials and communication herein. Hyperlinks to sites outside of our domain do not constitute an approval or endorsement of content on the visited site.

Top 5 Tips for Being a Successful Angel Investor

By Tim Houghten

What does it take to be a successful angel investor today?

This is the question that we get asked all the time at 1000 Angels, the private investor network that connects startups with investors. Becoming an angel investor has the potential for being insanely profitable, personally rewarding, and even bringing about essential world change. However, as billionaire Shark Tank investor Mark Cuban recently noted in a viral interview, in order to realize these results and sustain them, you have to know what you are doing and have some good luck along the way.

There are some finer mechanics to funding startups and including covering yourself legally, but the bulk of the matter can be boiled down to these five crucial elements…
 

1. Deal Flow

There are certainly some advantages to investing more money and energy in fewer startups.  However, It is important not to spread yourself too thin. Whether needing broader diversification, more opportunities to put your pent up capital to work in, or simply more choices of startups to select from, deal flow is important. Having options is a good thing.
 

2. Curated Investment Opportunities

More deal flow is great, but the type of deal flow you are receiving as an independent angel investor can be even more important. You may be only interested in healthcare and medical related startups, or early stage opportunities versus those on the brink of IPOs. There is a lot to choose from with an estimated 400 million plus entrepreneurs, often with multiple startups. For example, Tanya Prive (@TanyaPrive1), CEO and co-founder of 1000 Angels, says “only 3% of the startups that apply ever make it in front of our investor community.” This type of deal flow means preserving your time, focus,  energy, and ensuring you are targeting the best opportunities. You should expect entrepreneurs you fund to maximize their time, so why not lead by example and be efficient with yours when looking for opportunities?
 

3. Selecting the Right Matches

Even after narrowing the field down to quality startups with good chances of success, it is still important to select new ventures to invest in that are a good match for what you care about. For some angels it may be just about the money. However, you can take a more active role that will help the venture beyond simply providing dollars, such as by making introductions and being involved as an advisor. Cause driven opportunities and impact investing are also ways to be passionate while maximizing your investment.  So what do you care about? What drives you?
 

4. Invest in What You Know

The very nature of startups is to disrupt and change things. This can make it challenging to find a new venture that angels understand. However as Warren Buffett consistently reminds us, it is critical to “invest within your circle of competence.”

Try looking for startups with an element you do get. Perhaps it is a tech startup solving access to a healthcare challenge you are familiar with. Maybe it is a technology solution you are passionate about that is being applied to an industry you have experience in.

 

5. Invest in Extraordinary Entrepreneurs

There are thousands of new ideas and and concepts springing up daily. The difference maker often however is not the idea, but the strength and energy of the founding team. Follow the biographies of the most notable entrepreneurs and you’ll find one common thread. It is not IQ or where they went to school. It is how dedicated and relentless they were once they latched onto a mission. It is those that are committed enough to keep on going through the challenges and tougher days that will stick it out long enough to experience the fruits of their labor. Talent and experience plays a part, but without toughness and grit to get you through difficult times, those founders may not survive. Even a heavyweight investors like Mark Cuban can have run into these issues, as he did with Motionloft. It is key to  find the right business partners along with the business idea.
 

Summary

Select both great founders and great ventures to back.  Look beyond making money, stay alert to the boundaries of your circle of competence, and establish curated sources of deal flow.


This site is operated by Onevest Corporation. Onevest does not give investment, legal or tax advice. All securities listed herein are offered through North Capital Private Securities Corporation ("NCPS"), a registered broker-dealer, member FINRA/SIPC. Onevest has taken no steps to verify the adequacy, accuracy, or completeness of any information presented herein. By accessing this site and any pages thereof, you agree to be bound by the Terms of Use and Privacy Policy. Only Accredited Investors can invest in securities offerings posted on this website. All accredited investors using the Onevest platform must be verified as to their accredited status and must acknowledge and accept the high risks associated with investing in privately held companies and early-stage ventures. These risks include holding an investment for periods of many months or years with limited ability to resell, and the risk of losing your entire investment. You must have the ability to bear those risks. To the fullest extent permissible by law, neither Onevest nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising out of any error or incompleteness of fact or opinion in the presentation or publication of the materials and communication herein. Hyperlinks to sites outside of our domain do not constitute an approval or endorsement of content on the visited site.

JOBS Act Title III and Crowdfunding: What We Know So Far

By John Lion

Photo credit: Getty Images

Photo credit: Getty Images

Waiting on Title III of the JOBS Act? Join the rest of the nation including equity crowdfunding platforms like 1000 Angels, the private investor network that connects startups with investors, where currently only accredited investors are allowed to invest. Accredited investors are only 1% of the US population.

The SEC seems quite okay with postponing finalization until October 2015. Better late than never: an October implementation would be over 600 days since Congress's initial deadline.

Garnishing media attention since before 2012, the JOBS Act's Title III is among the most important landmarks in the history of modern crowdsourcing. It significantly broadens investment opportunities and a startup’s potential to raise capital through only a few legislative provisions. So why the hold up? More importantly, what can we expect if the SEC decides to pass Title III?  
 

The JOBS Act and Title II

Startups are great for U.S. tax collectors and consumers alike. Even 2012's Congress agreed, passing the JOBS Act with bipartisan support through both the House and Senate. Otherwise called the Jumpstart Our Business Startups Act, the legislation modifies a series of laws that enable startups to seek funds using methods that have been illegal since FDR's Securities Act of 1933.

The Securities Act does many things, but one quite significant for startups is the classification of who can invest, how much they can invest, and where they can invest. Specifically, the act works within a broad, pre-existing distinction of potential investors.  

  • Accredited investors have at least $1,000,000 in net worth (excluding primary residence) or an income of at least $200,000, annually, in the past two years

  • Non-accredited investors have a net worth of less than $1,000,000 or earned less than $200,000 annually in the last two years

Paying reverence to the age-old understanding that those good at making money and keeping it typically make sounder investments, the Securities Act severely limits startup businesses' ability to solicit funds in exchange for equity or debt. Only companies that fit within the Securities Act's exemptions, as defined in Regulation D, can accept funds without oversight (typically only from accredited investors partnering with the exempted business). There is some wiggle room, however, as organizations can include up to 35 non-accredited investors if offering full disclosure.

The JOBS Act refines Regulation D by progressively allowing more circulation, advertising, and inclusion of all manner of investors. The legislation itself has its advocates but also its detractors, with old guard unions and consumer protection groups particularly concerned about transparency and legitimacy. Still, a large number of outside investors and economists support the bill, as do younger folk less reverent towards the New Deal.

Divided into seven titles, the SEC is progressively introducing the JOBS Act section by section. Only Titles I, V, and VII went into action immediately after the bill's passage. Title II was not instituted until September 2013, a little more than a year after the SEC's deadline assigned by Congress.

Title II modifies Regulation D's 506(c) exemption to allow startups to solicit accredited investors and accept funds from them prior to being in "a substantial and pre-existing relationship," opening front doors that would otherwise require back entry. SEC official Keith Higgins announced that after six months of its implementation, $10 billion went into about 900 companies. Those numbers were actually a tad disappointing to Keith, but since then startups have continually managed to find accredited investors.
 

Title III: Potential Manifest

Title III, meanwhile, allows startups to solicit and include as many unaccredited investors as they wish. They still need to follow a few provisions to remain eligible:

  • Organizations may only solicit $1 million annually

  • Only registered broker-dealers and funding portals may intermediate purchases or investments

  • Investors can make a maximum investment of $2000 or 5% of their income if their net worth and annual income are both less than $100,000

  • Investors with over $100,000 in net worth or income may invest up to 10% of either

  • Businesses must offer total disclosure to all investors

When enacted, potential startup investors within the U.S. will increase from 3.5 million to 233.7 million. Look at the visual scale above. That entire blue square accounts for the mass of unaccredited investors.

See that speck of yellow within the blue square? That represents accredited investors, the block that startups can currently solicit.

The potential cash infusion is also intense, with a maximum of anywhere from 5% to 10% of an estimated $50 trillion. The image below offers a good idea of the scale difference, demonstrated by font size.

Some simple math makes such potentialities even more impressive:

  • A maximum between $2.5-5 trillion to startups within 1 year of implementation

  • $1 million cap per organization translates to anywhere from 2,500,000 to 5,000,000 successfully funded startups

Talk about strength in the majority. Even the more realistic projection, $300 billion, is 10 times the current VC investment market.
 

Holdback until 2016 at the Earliest

While startups wait, the SEC deliberates. Slowdown is typically due to bureaucracy and red tape, but the organization's molasses pace is easy to understand, and expected to continue. $50 trillion is an astounding number, as is the 233.7 million newcomers that may participate. A regulatory body familiar to working with a smaller group, the SEC may fear it lacks the ability to keep up.

Remember, the maximum businesses Title III could initially fund hovers between 2.5 and 5 million. Even with the conservative estimate of $300 billion, that means upwards of 300 startups can reach their annual cap. Overseeing and investigating such enterprises requires time, resources, and fresh ideas the SEC seems incapable or unwilling to spend.  

Still, the bureaucracy is moving ahead at a snail's pace. In October 2013, a month after enacting Title II, the SEC reviewed around 585 pages of equity crowdfunding laws applicable to Title III. Progress, though dawdling, does have some organization.   
 

States Taking Action: Intrastate Equity Crowdsourcing          

Startups are hardly the only ones holding their breath. Numerous states are also impatient, and many are introducing or considering legislation that will implement Title III before the SEC's 2016 projections. Of course, such crowdsourcing would have to be intrastate, limiting the cash innovative startups could potentially find within a more restricted region.

States that have already introduced or are in the process of introducing intrastate equity crowdfunding include Washington, Texas, Maryland, Michigan, Georgia, Oregon, Tennessee, Wisconsin, Main, Kansas, Tennessee, Alabama, Idaho, and Indiana. Many other states are either debating action or otherwise passing such legislature. Only two states so far, Florida and North Carolina, have shot down legislation.  

As with everything that is state-specific, methodology and standards vary quite a bit. All are eager to link with Title III, however, leading most states to conform to the legislation's standards. Portals are even taking interstate steps, such as crowdsourcing organization CraftFund.

Most states see the prospective funding as a means to either stay competitive or improve economically. Makes sense too. Equity crowdsourcing groups are setting up shop in Washington D.C and advocating in states where crowdsourcing equity has yet to pass. Similarly, templates for introducing legislature, organizing crowdfund campaigns, and total disclosure documents are circulating, helping to streamline the entire process.

Equity crowdsourcing advocates are quick to mention that small business loans are at 75 percent of their 2008 peak. Unlike large and medium-sized enterprises, which enjoy lighter credit standards, small organizations have little wiggle room and even less recourse. Equity sharing provides a good alternative that streamlines funding and is more inclusive than loans from traditional lenders.
 

Title III: New Voices, New Practices   

The raw potential of Title III is impressive. It offers startups an alternative means to prove their viability and expand without institutional red tape. Far from just fiscal, however, Title III's impact is also social.

Many of the startups that crowdsource are driven by passion or innovation rather than raw profits. The collective worth and size of non-accredited investors is massive, and within it is a cluster of niche interests, social concerns, and hobbies. Typically limited to giving advice or consuming, Title III will give non-accredited investors far more influence over products, services, and planning. The overall effect may radically affect culture, with product trends becoming more bottom-up in manufacturing and distribution.

Adoption by states, though primarily a product of frustration, adds some interesting possibilities. While they are being careful to stay with Title III's standards, states are still experimenting with methods and pragmatics alike. Public planners and crowdsourcers are studying the efficiency and overall growth of different approaches. Systemization and conglomeration will likely follow. That precedence can easily affect the SEC's own implementation of Title III and its fine print.

Nonetheless, investors and startups will be waiting until (at least) October this year to find out. In the meantime, we'll have to satisfy ourselves by keeping updated on Title III's progress and readying ourselves for its enactment.


This site is operated by Onevest Corporation. Onevest does not give investment, legal or tax advice. All securities listed herein are offered through North Capital Private Securities Corporation ("NCPS"), a registered broker-dealer, member FINRA/SIPC. Onevest has taken no steps to verify the adequacy, accuracy, or completeness of any information presented herein. By accessing this site and any pages thereof, you agree to be bound by the Terms of Use and Privacy Policy. Only Accredited Investors can invest in securities offerings posted on this website. All accredited investors using the Onevest platform must be verified as to their accredited status and must acknowledge and accept the high risks associated with investing in privately held companies and early-stage ventures. These risks include holding an investment for periods of many months or years with limited ability to resell, and the risk of losing your entire investment. You must have the ability to bear those risks. To the fullest extent permissible by law, neither Onevest nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising out of any error or incompleteness of fact or opinion in the presentation or publication of the materials and communication herein.

Hyperlinks to sites outside of our domain do not constitute an approval or endorsement of content on the visited site.