Entrepreneurship

Subscribe to Entrepreneurship via RSS

We are now more than three months into the Title III crowdfunding experiment.  I have been wanting to get back to posting on Title III crowdfunding since my “LIVE” post back in May, but so much other fun stuff has been going on!  So, to make me feel a bit better on that point, I will share some current crowdfunding data with you all in this post based on publicly available information obtained from a Westlaw search performed yesterday (Sunday, August 21, 2016).  [Note to the powers that be at the SEC:  EDGAR makes it hard to find the aggregated set of Form C filings unless you are collecting data on an ongoing basis.  I hope that changes as EDGAR continues to improve . . . .]  

At the outset, I will note that others have offered their own reports on Title III crowdfunding since I last posted (including here, here, and here).  These reports offer some nice summaries.  This post offers a less comprehensive data dump focusing in on completed offerings and withdrawn offerings.  At the end, I offer some limited observations from the information provided here about crowdfunding as a small-business capital-raising alternative, the need for EDGAR adjustments, inferences about the success of Title III crowdfunded offerings, and platform disclosure about withdrawn offerings.

First, however, the top-level Westlaw-based summary:

Total Form C filings: 85 (275 filings show on Westlaw, but only 85 are non-exhibit filings representing distinct offerings)
Total Form C/A filings (amendments, including exhibit filings): 153
Total Form C-U filings (updates): 4
Total Form C-W filings (withdrawals): 2

The remainder of this post takes a shallow dive into the updates and withdrawals.  Filings in each case are presented in reverse chronological order by filing date.  All referenced dates are in 2016.  Issuer names are copied from filings and may not be the actual legal names of the entities.

A colleague sent me a link to a White House blog post focusing on Title III of the Jumpstart Our Business Startups Act (JOBS Act), known as the Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act (CROWDFUND Act).  The main theme of the blog post, entitled The Promise of Crowdfunding and American Innovation, is stated in its summary: ”Crowdfunding’ rule makes it possible for entrepreneurs across the country to raise small-dollar investments from ordinary Americans.”  This much is true.  And the post accurately notes that “previous forms of crowdfunding” also already did this.

But the post goes on to extol the virtues of the CROWDFUND Act, which offers (among other things) a registration exemption for investment (or securities) crowdfunding–a very special type of crowdfunding involving the offer or sale of debt, equity, investment contracts, or other securities.  Or at least the blog post tries to extol the virtues of the CROWDFUND Act.  I am not buying it.  In fact, the post doesn’t come up with much of substance to praise . . . .

The coauthors focus a key paragraph on explaining why the CROWDFUND Act is heavy on investor protection provisions.  But they do not talk…

Beer is good.  It’s an opinion based on serious research.  A lot of beer laws are not good.  They often restrict beer distribution, limits sales, and generally make it harder for us to access good beverages.  

There have been some benefits of these restrictions.  The main one, probably, is that it provided the storyline for Smokey and The Bandit: 

Big Enos (Pat McCormick) wants to drink Coors at a truck show, but in 1977 it was illegal to sell Coors east of the Mississippi River without a permit. Truck driver Bo “Bandit” Darville (Burt Reynolds) agrees to pick up the beer in Texas and drive it to Georgia within 28 hours. When Bo picks up hitchhiker Carrie (Sally Field), he attracts the attention of Sheriff Buford T. Justice (Jackie Gleason). Angry that Carrie will not marry his son, Justice embarks on a high-speed chase after Bandit.

(Note that IMDB’s description — “The Bandit is hired on to run a tractor trailer full of beer over county lines in hot pursuit by a pesky sheriff.” — seems to have confused the film with the Dukes of Hazzard.  Crossing state, not county, lines was the issue and Rosco P. Coltrane was not part of the Bandit films.  I digress.)  

In my home state of West Virginia, getting craft beer, until 2009, was hard. Beer with more than 6% ABV could not be sold in the state. All beer in the state is “non-intoxicating beer” but the definition was raised from 6% so that it now includes (and allows) all malt-based beverages between 0.5% and 12% ABV.  

Some readers may be interested in the position listed below. Georgia Institute of Technology, Scheller College of Business has a strong faculty and is a recognized leader in the sustainability area.

———————

Managing Director, Ray C. Anderson Center for Sustainable Business

(Professor of the Practice or Academic Professional)

The Scheller College of Business at the Georgia Institute of Technology in Atlanta, Georgia seeks applications or nominations for an academic appointment as the Managing Director, Ray C. Anderson Center for Sustainable Business (ACSB). The Center is part of the Scheller College of Business, which was ranked #1 in the US and #8 globally in the 2015 Corporate Knights Better World MBA Rankings. The College is a dynamic environment with a commitment to sustainability embedded in its strategic plan and faculty members across many disciplines who have sustainable business interests. The Managing Director will have the opportunity to shape and steer the growth of the Center’s activities and impact, as the Center recently received a long-term gift doubling its operational budget from the Ray C. Anderson Foundation. The Managing Director will also have the opportunity to partner with the Georgia Tech Center for Serve-Learn-Sustain (CSLS), an institute-wide undergraduate education initiative that is developing learning and co-curricular opportunities designed to help our students combine their academic and career interests with their desire to create sustainable communities.

More information follows after the break.

Some of our December graduates haven just taken the Florida bar exam. As always, I asked them about the business associations questions. Florida drastically changed its LLC rules in 2014, but still hasn’t asked any questions about LLCs, focusing instead on partnerships and corporations (at least according to the students). From a review of the released questions, the bar didn’t ask about LLCs before the amendments either.

I teach BA again next year and I’m struggling with what to emphasize. Business Associations is not required in many Florida law schools, but it is at St. Thomas, and many students enter the class with trepidation. Most will only take the one required course and won’t go on to advanced classes in securities regulation, corporate taxation, or other drafting courses. I try to focus the required BA class on skills that graduates will need in the workplace in addition to preparing them for the bar by using released test questions. Now I wonder how to balance the tension between the rise of LLCs and the many changes in laws related to securities regulation with the bar’s continued focus on partnerships and traditional corporations.

Yesterday the Obama administration added Miami to the list…

Two weeks ago I posted about whether small businesses, start ups, and entrepreneurs should consider corporate social responsibility as part of their business (outside of the benefit corporation context). Definitions of CSR vary but for the purpose of this post, I will adopt the US government’s description as:

entail[ing] conduct consistent with applicable laws and internationally recognised standards. Based on the idea that you can do well while doing no harm … a broad concept that focuses on two aspects of the business-society relationship: 1) the positive contribution businesses can make to economic, environmental, and social progress with a view to achieving sustainable development, and 2) avoiding adverse impacts and addressing them when they do occur.

During my presentation at USASBE, I admitted my cynical thoughts about some aspects of CSR, discussed the halo effect, and pointed out some statistics from various sources about consumer attitudes. For example:

  • Over 66% of people say they will pay more for products from a company with “good values”
  • 66% of survey respondents indicated that their perception of company’s CEO affected their perception of the company
  • 90% of US consumers would switch brands to one associated with a cause, assuming comparable price

…

Amazon Prime Now has debuted in Nashville. Amazon Prime Now offers free two-hour delivery on many items for Prime members. The service is amazing and is already changing the way I shop. I really dislike shopping malls, especially during the busy holiday season, but I also dislike waiting weeks (or even days) for shipments to arrive, so Amazon Prime Now is a perfect solution.

With Amazon Prime Now expanding, I imagine even more brick and mortar retailers will be headed to bankruptcy unless they find a way to differentiate their companies and add more value.

Brick and mortar retailers may find differentiation through community building services. I already see some retailers attempting this. Running footwear and apparel stores are offering free group runs starting from their storefronts and/or group training programs for a fee. Grocery stores are offering group cooking classes. Book stores are offering book clubs. The list goes on.

These brick and mortar retailers are finding it more and more difficult to compete with e-retailers on price and convenience. With the rise in technology, however, face to face community seems to be increasingly rare. Brick and mortar retailers that aid in community building may…

Earlier this week, my co-blogger Josh Fershee authored an interesting post about the surprising crowdfunding success of the PicoBrew “Keurig for Beer.” After reading Josh’s post and the embedded links, I have to agree with him; I have no idea how they raised $1.4M for a product that I don’t see being that useful. The product appears to be both overly expensive and overly time-consuming.

I think many venture capitalists would join Josh and me in questioning the wisdom of PicoBrew, at least before it raised $1.4M. But as I wrote in an earlier post, crowdfunding may help overcome biases of venture capitalists. In the days since Josh’s posts, I have heard a few people talk about how excited they were about PicoBrew. These people were all at least 10 years younger than Josh, me, and most venture capitalists. While us “older folks” may not see a use for the product, judging from the crowdfunding results and a little anecdotal evidence here in Nashville, there appears to be significant market demand for PicoBrew. Similarly, on the show Shark Tank, the female “sharks” have accused their male counterparts of largely avoiding companies with products aimed at women; and while I…

Recently, a number of the sports media outlets, including ESPN, the Pac-12 Network, and Fox Sports featured a company called Oculus that makes virtual reality headsets used by Stanford University quarterback Kevin Hogan, among other players, to prepare for games.

In 2012, Oculus raised about $2.4 million from roughly 9,500 people via crowdfunding website Kickstarter. Following this extremely successful crowdfunding campaign, Oculus attracted over $90 million in venture capital investment. In mid-2014, Facebook acquired Oculus for a cool $2 billion. 

Oculus is only one example, but it caused me to wonder how many companies are using crowdfunding to attract venture capital, and, if so, whether that strategy is working. This study claims that 9.5% of hardware companies with Kickstarter or Indigogo campaigns that raised over $100,000 went on to attract venture capital. Without a control group, however, it is a bit difficult to tell whether this is a significantly higher percentage than would have been able to attract venture capital money without the big crowdfunding raises. 

If I were a venture capitalist (and I was raised by one, so I have some insight), I would see a big crowdfunding raise as potentially useful evidence…