Is Equity Crowdfunding a Solution for Film Financing?
The crowdfunding darling is at it again, but can they be as successful with a traditional rewards-based campaign?
January 21, 2016
In 2013, when director Rob Thomas and actress Kristen Bell were looking to realize their vision of creating a feature length film based on the much-loved TV series “Veronica Mars,” they turned to crowdfunding for help. In less than 10 hours, their campaign exceeded its $2 million goal, and continued on to a grand total of $5,702,153 with 91,585 project backers. A year later, the film grossed just over $8 million in global box office and domestic DVD/Blu-ray sales — not too shabby considering the limited-release nature of the film.

Thomas and Bell are considering a sequel or even a “True Detective”-style short-run television series, but can they strike gold again with a rewards-based (e.g. Kickstarter or Indiegogo) crowdfunding campaign? Since the first project proved that there’s still demand for Veronica Mars-related content, offering ownership of the final product through equity crowdfunding — as opposed to receiving a t-shirt or a signed poster — may attract more and larger investors for a follow up to the 2014 film. And thanks to long-awaited actions by the Securities and Exchange Commission (SEC), everyone is eligible to be an investor through “equity crowdfunding.” On October 30, 2015, the crowdfunding landscape shifted to allow not only “rewards-based” contributions but also “equity investing” by all U.S. citizens. This means that “project backers” can now also be “investors,” and they can have ownership in a business much like a shareholder of a publicly traded company.

I think it’s safe to say that the majority of the backers for the Veronica Mars film were happy with a t-shirt and a copy of the movie, and less concerned with the financial success of the film — after all, their ties with the project ended once they received their promised rewards. But now with equity crowdfunding, investors have an opportunity to earn money alongside the original project creators — in this example, Rob Thomas and Kristen Bell. For Thomas and Bell to take Veronica Mars to the next level, they’ll need larger, more serious investors with contingent interests, and equity crowdfunding just might be the way to go.

To learn more about equity crowdfunding, visit www.facebook.com/NextGenCrowdfunding

WR Hambrecht Leads the Charge for Equity Crowdfunding
by Steven Lord
January 21, 2016

If you think equity crowdfunding is a temporary fad, you should think again. Among the most pioneering and influential investment bankers in Silicon Valley, Bill Hambrecht of Hambrecht & Quist fame has jumped into it with both feet. His firm, WR Hambrecht, is a leading advocate of equity crowdfunding, helping companies raise capital through Regulation A+, the part of Title IV of the JOBS Act which enables smaller firms to offer and sell up to $50 million worth of securities in a given year.

This new regulatory regime has been called a “mini-IPO,” and is a home run for startups and early-stage businesses. They can now raise a significant amount of capital without having to go through an expensive and long IPO process.

More importantly, these startups are able to raise funds via online portals, one of the first of which belongs to WR Hambrecht. The site gives potential investors the ability to view information about Regulation A+ offerings, learn more about a particular firm, discover transaction details and download relevant documents. It is all a revolutionary departure from the way things used to be done.

Ultimately, the new rules and the involvement of broker-dealers like WR Hambrecht are creating a fresh pathway for both growth companies and investors alike. The “mini-IPO” process made possible through Regulation A+ will provide early-stage businesses with the capital they need to develop products, hire employees and grow, while investors will be given the opportunity to invest in promising new businesses.

WR Hambrecht’s pioneering embrace of this new era of crowdfunding is just the beginning. This could lead to a future where virtually all Wall Street broker-dealers will be using equity crowdfunding for “mini IPOs,” and investors will come to rely on the provisions of the JOBS Act and Regulation A+ to participate in new public offerings. With equity crowdfunding, small companies are now better positioned than ever to chase the American Dream and follow in the footsteps of powerhouses like Google, Genentech, and Adobe Systems.

Equity Crowdfunding 101
January 21, 2016
In 2015, the Securities and Exchange Commission (SEC) implemented Title III and Title IV of the Jumpstart Our Business Startups Act, or JOBS Act. Under new SEC rules, any member of the public has the ability to invest in privately-owned, early-stage and mid-size companies that are seeking investment capital through equity crowdfunding.

How does this change things for investors?

In short, now everyone has the potential to be an investor in a privately-owned company. Title III allows unaccredited investors the opportunity to reap financial benefits when a privately-owned company IPOs or is acquired by a larger entity — an outcome previously available only to accredited investors.

Before Title III, the only option available to the public-at-large was rewards-based crowdfunding on sites like Kickstarter and Indiegogo, where support was rewarded with goods or services. So, if people backed a company that was later acquired or went public, all they got was the previously promised goods and services — or sometimes, nothing at all.

What does it mean for companies?

Under Title III and Title IV, a company may accept investments from unaccredited investors — meaning companies will have the potential to attract more capital, which translates to higher growth potential than ever before.

Until now, fundraising from the general public was the exclusive domain of companies large enough to afford the high costs of going public on stock exchanges like NYSE and NASDAQ.

What businesses benefit most from equity crowdfunding?

Of course, not every business will find equity crowdfunding the best way to raise money.

Certain rewards-based crowdfunding campaigns, such as films like “Veronica Mars” — or even a business created to produce the film — do not translate as well in an equity crowdfunded setting. One reason is because the value of shares would be diluted by a large number of investors. Earning potential is also more limited when there is a finite end to a project.

For companies considering equity crowdfunding under these new rules, a critical factor to consider is if the amount being raised is $5 million or more. Although there is no minimum fundraising amount, completing the Regulation A+ process requires both time and money – upfront costs can be between $75,000 and $150,000. There are also ongoing costs related to financial reporting, as well as SEC filing costs and broker-dealer commissions.