Listen Now
If there is any one question I get asked more than any other from professionals in the social sector, it is some variation of this: “How do I raise money for my organization, cause or program?” And, there is usually a quick follow up that goes something like, “and, how do I raise money sustainably?” Fundraising, marketing, business development, sales… call it what you want… will always be the greatest problem for the social sector. The reason I know this is because it remains the greatest problem for any business, regardless of the sector. Getting individuals to part with their hard earned cash is never an easy prospect, whether your talking about a new pair of shoes, supporting Syrian refugees or anything in-between. There are many good answers to this question, depending upon a number of variables, and there are actually a ton of fantastic success stories in the social sector. But today’s episode is focused on crowdfunding and how this powerful platform can be used as a part of a successful strategy within the social sector. My guest for the 157th Terms of Reference Podcast, Jason Best, is more than an expert on crowdfunding – he actually is one of the original authors of what eventually became the Jobs Act in the United States, a law that fundamentally changed the investment landscape by allowing crowdfunding for equity, or an ownership stake of a company. Jason is a Co-Founder of Crowdfund Capital Advisors and a Venture Partner at Vectr Ventures. He works with governments and policy makers about how to make online fundraising available, with financial technology innovators about how to create solutions that respond to opportunities created by new policies and regulations and with large institutions and corporations to understand the market shift brought about by crowdfunding. This is an important episode where Jason and I talk about the 460 day campaign to get the Jobs Act signed into law, and how crowdfunding has fundamentally shifted how the social sector should think about fundraising now, and for the future. You can connect with Jason here: https://www.linkedin.com/in/jasonwbest/
IN TOR 157 YOU’LL LEARN ABOUT
- Jason Best’s career of making venture capital more accessible for social entrepreneurs, and making entrepreneur themselves more capable of tapping into the pool.
- Jason’s stint in political activism, and how his wording actually reflected the language in the JOBS Act which empower smaller investors
- Crowdfunding, through a tone-down lens, where it’s not a cure for all, just another tool to do something that’s inherently difficult and takes tremendous amounts of effort
- The importance of massively creating value to people before even thinking about getting money from them
- What it takes from funds to flow to underserved places, and the infrastructure that could make it happen
OUR CONVERSATION FEATURES THE FOLLOWING
Names:
- American Airlines
- Vectr Ventures
- Crowdfund Capital Advisors (CCA)
- US Congress
- The White House
- Securities Exchange Commission (SEC)
- Kickstarter
- Kiva
- Stanford’s Global Entrepreneurship Summit
- Gary Vaynerchuck
Topics:
- Venture Capital
- Crowdfunding, Equity
- Financial Technologies (FinTech)
- Jumpstart Our Business Startups (JOBS) Act
- Wall Street Stock Market Crash of 1929
- “Rockstar” Entrepreneurship, High-rate capital raising
- Value
- Due Diligence
- Venture Capital Infrastructure, Transaction Fees, Barriers
- Intellectual Property (IP)
- Diaspora Investing
- Harmonization of Law and Technology
Places:
- Hong Kong
- Washington, DC
- Silicon Valley
- Santiago de Chile
EPISODE CRIB NOTES
[AUTOMATED TRANSCRIPT] TOR157_ How Crowdfunding Is Shifting The Financial Landscape For The Social Sector with Jason Best Based off American Airlines Partner at Vectr ventures, in Hong Kong Co-Founder of Crowdfund Capital Advisors FinTech (Financial Technologies) Bringing equity into development “It all started at a friend’s wedding” 15 years SF Internet, business side of things He was able to get money because he was there SF “Is where the money is” Then he move to a place where there is no money Capital is plentiful in the US “in 4 cities at most” Laws that govern how money flows and is invested are 80 years old So, back at the wedding “Maybe it’s time to change US law” It sounded like a good idea at the time “Laws are never going to change” “But entrepreneurs are stubborn enough to never get a stable job” Instead of going with a problem, they went to the government with a solution It elicited a reaction, then a conversation What was the solution? “If you give money to people through Kivas and Kickstarters, why not the people you know and deal with?” A 10-point framework for lawmakers, media “We went to whoever would listen” SEC tapped them on the shoulder 2011 Going to people’s offices Lawmakers turned their heads at the sound of jobs, probably innovation also A year and some later, they testify before Congress JOBS Act language of crowdfunding thanks to them The law passed… but job was only starting It was time for the SEC to regulate The JOBS Act made possible for individuals to invest in crowdfunding Before the 1929 crash, salespeople went door to door selling stock “Unsophisticated investors” Information was hard to come by. “You had to go to a place” Today, information has high liquidity Are the rules now too overcautious? The big change makes the law aware of the wealth of information at the investor’s disposal High risks still exist, the law is not meant to make investors riskier But funding must be broadened “People should not have to go to Silicon Valley” “I want people from Nairobi or Santiago de Chile to access funds” A little too altruistic? At the White House, he’s told “You know your lives are going to change?” “Naah” CCA grew to cover over 40 countries CCA works with government, FinTech innovators Large transnationals too, sometimes with State Department’s missions Policy frameworks with the World Bank “People think crowdfunding is a cute way to pay for gadgets” In reality, it’s a USD 3 Billion a year industry in Kickstarter alone It is reshaping the world of finance in many places Impact similar to mobile payments. “They are precursors” As people get emboldened with low-risk ways to move money around, they will be willing to be more daring, and invest overseas FinTech fallacies dispelled “Raising money for a business is always difficult” “Crowdfunding is another way to do a difficult thing” You have to build networks, follow through on due diligence “You used to have to buy rich people lunch to beg for money. Now you might have to still do that” For social entrepreneurs, it’s interesting as the sector is always looking for new funding For a lot of NGOs is “fund or die”. If their causes aren’t supported one term, the organization is thru Social organization always have to be on the move, they’ve always had Crowdfunding might be a tool to keep energizing their funding base “It won’t be successful by itself” It would take a lot of experimentation about who, how, how much Constant tactical efforts, to get small amounts of funding constantly Crowdfunders like to feel they are involved (“I helped!”) The way forward seem to be by small steps Then it becomes your full-time occupation Crowdfunding is a full-time occupation during a 3-month campaign Then it’s another 60-90 days following through The campaigns that fail stay online Average (successful?) kickstart raises USD 20K The few campaigns that go viral are the ones who put “tremendous amounts of energy, discipline, tactics… and some luck” At Stanford’s Global Entreprenurship Forum A “rockstar” entrepreneur is expected to share her “secret”. She reveals: There’s no secret. She went after every single contact, from finance to media to business She crafted special, custom messages for each She spend lots of time figuring out the right venues to share her ideas and “give value” Only after about 6-9 months of delivering value, she was able to pitch people Gary Vaynerchuck (“Gary V.”) and others talk about “give, give, give, ask” If you reach out to your class 10 years later asking for money, it’s not going to happen Spend some time building a relationship, demonstrating expertise and “worthiness” Grunt work More details about how there’s no secret sauce to crowdfunding Tell me about a business that ignored, or worse, fought the internet, and succeeded People tend to start with Kickstarter, “which is great sometimes, but it’s much better if you have a prototype to share” Kickstarter helps find product-market fit For established businesses looking to scale, Kickstarter could work, or equity campaigns might do it too Equity and pitfalls for crowdfunders 101 Infrastructure building in several countries where there was none, in recent years Standardizing processes, due diligence With the infrastructure in place, crowdfunding can flow People can give and ask for money with lower transaction fees, barriers Take it seriously Investors want to support you, but they also want their return They are aware of risks, but you should always focus on what you will have to return “You need to have some answers” Common issues with crowdfunding are fraud and IP On fraud: globally, incidence rate is close to 0, including Kickstarter (Deliberate fraud, not project development failure) There’s several ways of investor protection On IP: Maybe an overgeneralized fear Tell me one example of someone who’s succeeded on the internet by stealing IP Execution, execution, execution There’s ways to always manage, and overcome these details What about control, dilution, opportunities? How “easy” and opportunity is tends to be correlated with the term Being bought is an easy way to cash out while giving away the chance of future Speaking of future… In the US, equity crowdfunding is set to a slow start, “as all new mechanisms have” New people using new ways to get new kinds of things done… it makes sense it takes its time Asia, Latin America, more places will regulate Crowdfunding Local perspectives Trans-border investing, Diaspora investing Harmonization of law and technologyPlease share and participate
If you have any questions you’d like to ask me or Jason directly, head on over to the Ask Stephen section. Don’t be shy! Every question is important and I answer every single one. And, if you truly enjoyed this episode and want to make sure others know about it, please share it now:[feather_share show=”facebook, twitter, linkedin, google_plus” hide=”reddit, pinterest, tumblr, mail”]
Also, ratings and reviews on iTunes are very helpful. Please take a moment to leave an honest review for The TOR Podcast!
