News Column

Crowdfunding Roadshow Pitching the Possibilities of the New JOBS Act

August 8, 2012

James Dowd

Crowdfunding

Last week, Boston. Up next, Pittsburgh.

But Monday evening was all about Memphis, as the founder of Miami-based EarlyShares brought his crowdfunding roadshow here to meet with more than 50 entrepreneurs and investors. The Bluff City is the only Tennessee stop on the tour, which kicked off in Chicago in June and crisscrosses the country through the end of the year.

The event, held at Memphis Bioworks Foundation, featured EarlyShares CEO Maurice Lopes discussing the bipartisan Jumpstart Our Business Startups (JOBS) Act, which President Obama signed into law earlier this year. The initiative is designed to make it easier for small-money investors to pool resources and finance -- or crowdfund -- startups.

And that's particularly interesting to many in the Memphis entrepreneurial ecosystem, a loosely connected, but largely collaborative community that boasts four nationally renowned early-stage accelerators/incubators, the Center for Entrepreneurship and Innovation at the FedEx Institute of Technology on the campus of the University of Memphis, the state's only U.S. Minority Business Development Agency center and growing numbers of educational and professional programs aimed at entrepreneurial development.

Lopes said that including Memphis in his "24 Cities in 24 Weeks" tour was a strategic move because of the emerging local entrepreneurial scene. Lopes is looking to secure additional entrepreneurs and investors for EarlyShares.

"We're going to places with strong entrepreneurial communities that have a focus on technology," Lopes said. "We believe Memphis embodies that."

Allan Daisley, director of innovation and sustainability issues for Bioworks, said the booking the program was timely.

"Crowdfunding is getting more traction and early-stage startups are looking at this as a way to access capital," Daisley said. "We worked with LaunchYourCity to host this event because of its relevancy to our entrepreneurial community."

EarlyShares is an equity-based crowdfunding company that has attracted more than 700 companies and thousands of potential investors while awaiting approval from the U.S. Securities and Exchange Commission. The SEC green light is expected by February, Lopes said, but until then entrepreneurs and investors are encouraged to visit the online site and become familiar with the process.

EarlyShares differs from crowdfunding sites such as Kickstarter.com, which some musicians and artists use to fund projects or tours. At Kickstarter, people pledge money to a specific project and if a preset monetary goal is reached, the investor may receive a token of the artist's appreciation, say a T-shirt or a film credit. If the monetary goal is not reached, the investor isn't out any money and the project is not funded.

EarlyShares is an equity-based crowdfunding site where investors pledge money to help new businesses get off the ground and in return, investors will be part owners of the companies. If the startups are successful, investors receive returns on their investments. EarlyShares will charge a fee -- usually 6 to 9 percent of the amount to be raised -- for operational costs. Startups will be vetted by business consultants and the average "raise" sought by entrepreneurs is $250,000.

But not every startup seeking funding will be accepted and the minimum raise is $100,000.

"It's probably not an avenue we'd consider, but I could see it as a funding option for some entrepreneurs," said Mike Hoffmeyer, CEO of local startup Paytopia. "You'd have to be comfortable with releasing some of the control of your company to a lot of investors, but if you don't mind that then this will probably be very attractive to you."

Similar to Kickstarter, if a monetary goal is not reached with a specified time period on EarlyShares the deal will be void and investors won't lose their money. As for fraud, Lopes said that the risk is low.

"While it may be easy to get money from one person to invest in some flaky idea, it's more difficult to convince hundreds or thousands of contributors to invest in that kind of startup," Lopes said. "But if thousands of people want to invest in it, there's a good chance that the idea will work because so many people are already behind it."

EarlyShares

What: Online crowdfunding site for startups and investors

Principal: Maurice Lopes, CEO and founder

Founded: 2011

Headquarters: Miami, Fla.

Details: earlyshares.com



Source: (c)2012 The Commercial Appeal (Memphis, Tenn.) Distributed by MCT Information Services


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