Update on Georgia Crowdfunding

12 May

Much progress has been made in Georgia regarding “legal” intrastate crowdfunding since I first posted about this topic a little over a year ago. Below, I’ll give a quick update on how the market is growing regarding the use of the Invest Georgia Exemption.

Infrastructure:

- Platforms:

All of the below platforms allow “non-accredited” investors to invest using the Invest Georgia Exemption. Angel investors (Accredited investors) can also invest, but the primary market is directed towards non-accredited investors. (FYI-“interstate” investing, a la JOBS ACT, is not yet legal)

SparkMarket: equity. Atlanta based, IGE

Sterling Funder: equity, Atlanta based, IGE

Groundfloor: debt, North Carolina Based, operating in Georgia, Real estate focused, operating in GA and other states, IGE, Reg A

Crowdvested : equity, debt, real estate focused, Georgia-based properties, IGE

MarkerStaker equity, Atlanta-based, medical innovations, IGE

Community:

- Georgia Crowdfunding Community (Atlanta, 350+ members, meets once a month, free)

http://www.meetup.com/Georgia-Crowdfunding/

 

-Georgia Crowdfunding Investors (Atlanta, private, new, dues-paying, meets 1-2 a month, non-accredited members)

http://www.meetup.com/Georgia-Crowdfunding-Investors/

 

Augusta Crowdfunding Group (Augusta, GA, 30+ members)

http://www.meetup.com/Augusta-Crowdfunding-Group/

 

Service Providers (lawyers that understand the Invest Georgia Exemption)

 

Stephen Wright, Taylor English

Dan Schmalo, 360 Law

 

State of Georgia Resources

Tom Zagorsky, Director, State Securities Division

 

Presentations:

“Understanding the Invest Georgia Exemption”, Tom Zagorsky

“Understanding the Invest Georgia Exemption” (Tom Zagorsky)

 

 

There are 367 “active” angel investors in Atlanta, Georgia.* Whaaaat??

2 Dec

Is this good or bad? True or not true?

For the sake of clarity, I consider an “active” angel to be one who is a “member” of an organized angel group (such as the Common Angels in Boston) and who is actively investing in angel deals in their community or through one of the new online platform such as AngelList.

FYI–I have tackled this subject of accredited households in a previous post, and have had a long standing interest in determining the “numbers” of active angel investors.

http://investgeorgia.org/2013/08/30/how-many-accredited-households-exist-in-the-us/

However, in my August post, I only used the GAO and SEC studies to determine the approximate number of accredited households in the US, not the actual number of “active” angel investors in the US.

Number of “active” angel investors in the US: 265,000.

Here is where the number 265,000 for active angels is derived–Last week, I read a recent presentation that the Angel Capital Association gave to the SEC at the November 21, 2013 SEC Forum on Small Business Capital Formation.  The Angel Capital Association is the preemminent angel investor trade organization in the United States and they are the sister organization to the Angel Resource Institute. They collaborate with Silicon Valley Bank on the Halo Report and they collaborate with the New Hampshire Center for Venture Research. I trust their numbers and their research.

SEC Presentation:

http://www.sec.gov/info/smallbus/sbforum112113-materials-mirabile.pdf

 SEC Agenda:

http://www.sec.gov/info/smallbus/forum-agenda-111213.pdf

In the presentation (slide 8) the Angel Capital Association gives the number of accredited (“angel” investors) households on a national basis (8.7M—which is on the high end), the number of “active” angels (265,000), and the number of angel investors in formal angel groups in the United States (15,000). The 265,000 “active” angels represent approximately 3% of the overall population of the 8.7M “accredited” households. Interestingly, the above 3% also corresponds roughly with my previous post in which between 3% and 5% of the overall population are “accredited” households.

By coincidence, the Wall Street Journal published a story today about angel investing that uses similar numbers:

 “What You Need to Know to Become an Angel Investor”

http://online.wsj.com/news/articles/SB10001424052702304402104579149390398554348

Since I live in Atlanta, Georgia, we will use Atlanta as an example of these numbers and attempt to postulate how many accredited households are in the state of Georgia and in the city of Atlanta and how many of those accredited investors can be considered “active”.

- 2012 US Population of Accredited households: 8.7M

- 2012 Active Angel Investors: 265,000

—————————————————————————————————-

- 2012 US Population: 315M

http://www.commerce.gov/blog/2012/12/28/census-bureau-projects-us-population-3151-million-new-years-day-2013

- 2012 Georgia Population: 9.9M

http://quickfacts.census.gov/qfd/states/13000.html

- 2012 Atlanta, Georgia population: 443,775

https://www.google.com/#q=population+of+atlanta%2C+georgia

8.7M/315M = .0276 or 2.76% of the US population are accredited households

9.9M X .0276 = 273,240 accredited households in Georgia

273,240 X .03 = 7,541 “active” angel investors in Georgia

443,775 (Atlanta Pop) X .0276(% of accredited investors) X .03 (Active angels %) = 367

So there you have it. If you are a company looking to raise capital from accredited, “active” angels in the city of Atlanta, Georgia, you have 367 customers.

*I am not a researcher, nor a lawyer nor represent any angel group. I just like to keep up with this fascinating field. Please alert me if you believe my math above is incorrect or my conclusions in error.

It’s Time for All Atlanta Angel Investors to “Jump The Shark”

13 Oct

11 years ago, I put in processes (as then Managing Director of the group) that helped the  Atlanta Technology Angels grow from handful of dispersed “early stage” investors into the largest angel investor group in the Southeast. Many of those processes still exist, and many have been improved upon. Angel investing has grown tremendously since that time.  I love the group and have made many wonderful friends during my association with ATA.

However, on September 23, 2013, “things changed” in the angel investor world. As of that date, the SEC put out new rules based on the JOBS Act that allows private companies to use “general solicitation” to attract accredited investors as investors in their startups.

And, thus was born AngelList “Syndicates” on September 23. Brilliant. Here’s how they work.

I’ve done one–Descomplica. I’ve also “backed” four other syndicates. I’d like to back others–especially in Atlanta. Problem is, there are NO active AngelList Syndicates in Atlanta.

Time to jump the shark, Atlanta angels. Time to get active, Atlanta entrepreneurs.

So, to help push things along, I have created an AngelList Syndicate for Atlanta-based investments:

https://angel.co/atlantatech#syndicate

Join mine. Now.

I’ve even started a Meetup group: Atlanta AngelList Syndicates It’s free and open to discuss AngelList Syndicates or angel investing in general. Join that. Get involved.

I’m always looking for good Atlanta based investments–and Atlanta needs your help and support to fund great Atlanta-based companies. I’d like to see more AngelList syndicates in Atlanta AND I would like to see collaboration among Atlanta AngelList syndicates, angel groups and local venture firms.

Here are a few reasons (among many) why these syndicates are extremely important to angel investors and entrepreneurs in Georgia:

Angels

-These syndicates allow local angel investors to expand their (investor) networks on a national basis–instantly.

-These syndicates allow angel investors who are not affiliated with a formal angel group to instantly create a network and/or syndication

-These syndicates allow angel investors to quickly form an online group of interested investors to participate in a local investment. The “lead” Syndicate will have done the due diligence and AngelList and/or Secondmarket help with back office documentation. (No more LLC’s and K-1’s? Whoohoo!)

-These syndicates could allow angel investors to take a small portion of a VC raise (Series A, for example), and allow local angels to participate.

-These syndicates allow the angels doing the work to put the syndicates/deal together a chance to get paid if the investment exits profitably in the future: a 15%-20% carry on the gains.

Entrepreneurs

-These syndicates offer an OPEN investment process to qualified investors on AngelList

-These syndicates offer access to thousands of investors across the nation.

-These syndicates offer a “general solicitation” platform for entrepreneurs raising capital (if they choose to do so)

AngelList has already closed a number of Syndicates, including Shyp–which raised $250,000 on AngelList in…53 minutes.

What are you waiting for? Get there first.

How Many “Accredited Households” Exist in the U.S. ?

30 Aug

Many of you reading this blog know how to define an “accredited investor” (aka: angel investor)

Question is, how many “angel” investors really exist in the U.S.? It’s a question, and the answer, that has eluded me for years. However, with more attention focused on angel investing these days, numbers are now easier to come by.

There are published reports (Google, etc) that will give you a number, but I wanted to determine the information using sources I can find that are reliable. Often as well, these numbers will mix the terms of individual angel investors with the term of accredited households.

First,  let’s take a look at the July 2013 GAO report to the Securities and Exchange: “Alternative Criteria for Qualifying As An Accredited Investor Should Be Considered”.

This is a 69 page report by the U.S. Government Accountability Office generally recommending that the SEC add additional qualifications in 2014 to the “accredited Investor” criteria such as “liquid investments” and the “use of a registered advisor”. However, buried in the report are some wonderful facts related to the number of “accredited “households” that exist in the U.S.

To start:

On page 18/19, we see that the GAO uses the Survey of Consumer Finances to determine that there are 118,000,000 households in the U.S.

On pages 9/10, we see that SEC uses proprietary information (dated 2007 re: page 10) to determine the percentage number of households in the U.S. that are accredited.

SEC: 

1980: 1.7% (when accredited investor status first initiated)

2007: 9.0%

2010: 7.2% (after “primary residence” was removed from qualifying criteria)

However, the GAO uses information dated 2010 (page 10).

GAO:

1980: not available

2007: 5.2%

2010: 2.8% (after “primary residence” was removed from qualifying criteria)

We can do a quick calculation using the SEC 2007 numbers and the GAO 2010 numbers to determine the estimated number of “accredited households” in the U.S..

SEC                                                 GAO

2007:  10,620,000                          2007: 6,136,000

2010:  8,496,000                            2010:  3,304,000

(statistical range +/- 15%)

So, from a 2010 high range using SEC numbers to a low range using GAO numbers, we can see that roughly 3, 300,000 and 8,500,000  accredited households exist in the U.S.

Surprised? So, how many exist in your state? Your town? And how many of these “accredited household” are active angel investors?  Those are my next posts….

The Georgia Crowdfunding Investor Group

22 Aug

I have started a new investor-based group–the “Georgia Crowdfunding Investor Group”. The group is open to Georgia residents who can be non-accredited investors or accredited investors.

Our Crowdfunding Investor Group will be dues based (to offset meeting costs) and “dues paying” members only. We will screen prospective member investors to make sure all interests are aligned and expectations are understood. The group will initially meet twice a month in casual settings. We will get to know each other first and initially discuss best methods of sourcing Georgia based companies.

There will be an expectation that all members of the group will commit to invest in at least 2 companies during the course of one year. The investments can range at from $1,000 to $10,000+.

The group will not “recommend” investments in any particular company—rather we intend to provide access, resources and information available for group members to make personal decisions.

I am organizing the group (for now) through Meetup:

http://www.meetup.com/Georgia-Crowdfunding-Investor-Group/

If you are interested in joining, please apply at the above link–or ping me at:

<kmassey at mindspring.com>

The Georgia Crowdfunding Investor Group will review:

- Georgia-based companies offering securities through the Invest Georgia Exemption rules

- Companies that will raise capital using the upcoming Title III rules and regulations of the JOBS Act (rules and regulations expected roughly 1st Q, 2014)

- Georgia companies that have raised capital through donation/contribution sites (Kickstarter/Indiegogo, etc) Our group will mentor these particular companies during their next steps of raising capital and will help with sourcing resources as they grow.

The crowdfunding market is growing fast—both in Georgia and at a national level. Infrastructure  for online transactions of equities is complete at a national level and numerous platforms will be launched in Georgia in the next 30-60 days to facilitate investments into companies using the Invest Georgia Exemption.

I believe we need at least 20 members within the next 30 days to scale the group and to validate the (investor) market. So–to get the group started, the first 20 members to join will have annual dues discounted to $250 for the first year. No one will be charged dues until we reach 20 members.

Additional Information:

Dues will be used to offset monthly meeting costs and access to:

Crowdfunding Education:

- Invest Georgia Exemption
– Federal JOBS Act (Title III Crowdfunding on national basis)
– Donation based platforms such as Kickstarter and Indiegogo
– Securities laws, rules and regulations (IGE, 506 Reg D, Federal Rules: 3a (11), 147, Reg A etc)

Dealflow

- Curation
– Due Diligence
– Analysis of Management
– Ability to attract financing
– Analysis of company financials
– Fund raising

Analysis of current Georgia crowdfunding platforms

- Equity
– Debt
– Donation/Contribution
– Real Estate

Service Based companies

- Legal services
– Accounting Services
– Marketing
– Services needed to create a crowdfunding platform (video, marketing, presentations, SEO, website development, etc)

Join Now! Tell your neighbors! :)

Get there first.

Ohio Startups, Ohio Doesn’t Want You. Move to Georgia!

15 Aug

 

Why come to Georgia? We have friendly regulators that are innovative. 

 

We don’t have angry Ohio regulators who want to throw you in jail.

 

We have legal intrastate crowdfunding.

 

We have great angel investor groups.

 

We have lots of great VC funds.

 

We have a state-based VC Program.

 

We have ATDC.

 

We have young startups and grownup startups.

 

We have a great airport.

 

We have a great, innovative Governor and Lt. Governor. 

 

In short, we’re here to help you. Not throw you in jail. Move to Georgia.

 

The Funding Landscape Is Changing. Hustle, Or Get Left Behind.

12 Aug

The ability for private companies to raise capital from private sources has changed dramatically over the years. In the Atlanta, Georgia market, I generally observe local companies attempt  the now traditional route of  raising capital from personal funds or “friends and family” first, then angel investors, and finally, venture capital (if all goes well).

I think many local companies are missing how the landscape of capital raising is changing and are missing opportunities that other areas of the country are successfully using–or are ignoring unique opportunities within the State of Georgia. Here is a sample of how the landscape has changed or is changing….

20 years ago:

Personal funding

Friends and Family

Venture Capital

10 years ago:

Personal funding

Friends and Family

Angel Investors

Venture Capital

5 years ago:

Personal funding

Friends and Family

P2P debt lending

Angel Investors

Venture Capital

3 years ago:

Personal funding

Friends and Family

Donation/Contribution (Kickstarter, Indiegogo,etc)

P2P debt lending

Angel Investing

Venture Capital

Present Day

Personal funding

Friends and Family

Donation/Contribution(Kickstarter, Indiegogo)

P2P debt lending

Angel Investing

AngelList Syndicates

Kiva Zip

Venture Capital

1 year from now:

Personal funding

Friends and Family

Donation/Contribution (Kickstarter, Indiegogo,etc)

Invest Georgia Exemption (intrastate equity funding)

P2P lending

Angel Investing

AngelList Syndicates/Kiva Zip

Invest Georgia Program (Georgia state-based $100M Venture Fund)

Existing Venture Capital

I hear this phrase a lot around Georgia–“There is not enough capital to go around”. That’s old school thinking. Local, regional and national opportunities have increased dramatically in just the last few years. The capital is out there–you have to HUSTLE and think innovatively.

Get there first.

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