The Early Growth of the Georgia Crowdfunding Community

3 Jul

I have written previously on the current ability within Georgia to “crowdfund” Georgia-based companies by non-accredited Georgia investors here and here. If you are not yet aware of this new ability to help fund young Georgia startup companies, please do read the earlier articles

Let’s take a look at a few metrics below in the growth of our Georgia Crowdfunding Community I set up on MeetUp back in April. The intent of this Meetup group is to help form a Georgia-specific community revolving around the “Invest Georgia Exemption”(IGE). The IGE allows non-accredited investors (accredited investors, or “angel investors” already have the ability to invest in any private company) to invest in many young, private, Georgia based startups and allows Georgia-based companies to raise additional capital from a much larger segment of the Georgia population.

Here is a link to the Georgia Crowdfunding Community Meetup Group. Please join!

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

Georgia Crowdfunding Community Meetups to date:

April 17: 23 attendees
May 15: 150+ attendees

Future Scheduled Meetups:

July 30: Atlanta Tech Village
August 15: Atlanta Tech Village

Details on the upcoming July and August Meetups are on the Meetup site here.

Membership:

April: 20 members
May: 50 members
June: 98 members (almost to 100!)

The Georgia Crowdfunding Community Meetup group is roughly doubling in membership every 30 days. In April when I first started the group, I was hoping for 100 members by end of June. We came close—96 members at the end of June!

I think this group needs to be MUCH MUCH LARGER. We need to set a new goal and try to hit 500 members by end of September!!

With the upcoming Meetups on July 30 (Atlanta Tech Village) and August 15 (ATDC), there will be a lot of activity in the market. To hit 500 members by September 30, we will all have to keep an eye out for those in the community who are interested in learning more about Georgia Crowdfunding and actively recruit them to this Meetup Group. Please push them to this group.

Can you imagine how much we can help build the crowdfunding community in Georgia if we have 500 members within 6 months? Wow.

I am continuing to work to help create a strong identity for the group and to establish priorities for this Meetup group to grow and flourish. Please let me know all of your thoughts, feedback and recommendations.

The Invest Georgia Fund

5 Jun

On April 29, 2013, Governor Nathan Deal signed into law House Bill 318 which enabled the creation of the Invest Georgia Fund.

The Invest Georgia Fund will be $100M in size and will be invested into Georgia companies over a five year period. Most likely, the Invest Georgia Fund will be funded in fiscal years 2104 – 2018.

The Invest Georgia fund will be a state-based investment fund that will, in turn, allocate capital to Georgia-based venture capital and private equity firms to invest in Georgia-based companies.

A seven person Invest Georgia board will be appointed by Governor Deal., Lt. Governor Cagle and House Speaker David Ralston to oversee the program and to help select an independent fund administrator which will be tasked with helping to select the Georgia-based investment firms.

The fund administrator  is expected to consist of experienced investment professionals and will be responsible for administering the Invest Georgia Fund and responsible for selecting a group of Georgia based venture capital and/or private equity funds in two categories, early stage venture capital funds and growth stage venture capital funds. 40% of the monies in the Invest Georgia Fund will be designated to the Georgia-based seed/early stage funds and 60% of the monies in the Invest Georgia Fund will be designated to the Georgia-based growth stage funds.

Congratulations to all involved!

5 Georgia-based Investment Related Laws or Rules You Need to Know

30 May

If you are a Georgia angel investor (accredited or now non-accredited), a general partner or limited partner in a Georgia-based venture fund, or a Georgia entrepreneur seeking to raise capital in the great State of Georgia, you need to know about these 5 Georgia laws and/or rules…..now.

I will write longer posts on each of these over the next two weeks, but for now I have included links and or a sentence or two why these laws or rules are significant for investors and entrepreneurs in the State of Georgia.

2010

House Bill 249:

Firefighter’s Pension Fund Alternative Investment legislation

Passed April 27, 2010

Signed into law May 24, 2010

Effective July1, 2010

This law establishes the ability of the Georgia Firefighters pension fund to invest in Alternative Investments. This ability has been banned in Georgia for 30+ years. Here is the report of current alternative investments.

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House Bill 1069

Georgia Angel Investor Tax Credit, 2010-2013

Passed April 29, 2010

Signed into law June 4, 2010

Effective June 4, 2010

This law gives a credit on state income taxes to individual angel investors that invest in Georgia-based “qualified companies”. (Read the legislation.)  This law is in effect from 2010-2013, but has now been extended in the 2013 Georgia Legislative Session to 2015.

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2011

Secretary of State Amends Rule 590-4-2.08

Creates: Invest Georgia Exemption

Very important rules to come out of the Secretary of State office, IMO. Vince Russo, the General Counsel in the Secretary of State Office worked closely with Secretary of State Brian Kemp to get these rules out in 2011, with the final rules established in early 2012 . These rules give Georgia for-profit companies the ability to raise up to $1,000,000 per year from Georgia  residents (both accredited and non-accredited). Non-accredited investors can invest up to $10,000 per company and accredited investors can choose to invest more. Georgia for-profit companies are also allowed to advertise their capital raise to Georgia residents.

See my earlier post here for more information.

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2012

Senate Bill 402

Employees’ Retirement System of Georgia Enhanced Investment Authority Act

Passed March 29, 2012

Signed into law, April 6, 2012

Effective July 1, 2012

This law gives the ability of the Employment Retirement System of Georgia (excluding the Teachers Retirement System) to invest in Alternative Investments, up to 1% a year from passage of law up to a 5% cap of total assets. The law also defines alternative investments.

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 2013

House Bill 318

Invest Georgia Venture Capital Fund

Passed March 25, 2013

Signed into law, April 29 2012

Effective April 29, 2013

This law creates the structure of a $100M venture capital fund that would allocate capital to Georgia-based venture and private equity funds. These funds in turn would invest in Georgia-based high growth companies over a five year period.

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House Bill 318

Georgia Angel Investor Tax Credit renewed, 2014-2015

Passed April 29, 2010

Signed into law June 4, 2010

Effective June 4, 2010

See an earlier post here for up to date information on this law.

We are making some great strides here in Georgia in creating a thriving public/private collaboration that is working to help fund, build and support Georgia-based companies!

The Basis of Legal Crowdfunding in Georgia

3 May

Last week, I wrote a post about about equity crowdfunding in Georgia. It was my most widely read post and has generated numerous emails and phone calls and has caused a number of hallway conversations at the Atlanta Tech Village where I have an office on the second floor.  The general reaction to the news has been positive, but also with a sense of curiosity that this rule has existed for 18 months in Georgia with virtually no one noticing.

Let me first clear up some misperceptions:

–  The Invest Georgia Exemption in the not the same as the Invest Georgia legislation that  was recently signed into law (otherwise known as House Bill 318). Similar names, but very different and not related. The Invest Georgia Exemption(s) is a state security regulation, promulgated by the Georgia Commissioner of Securities (aka: Georgia Secretary of State) and the Secretary of State Securities Division “in the public interest”, that allows for-profit Georgia companies to raise a limited amount of capital through a public offering from accredited and non-accredited Georgia  investors without the added expense of filing a registration statement with the state or federal government.  The Invest Georgia legislation, signed in to law on April 29, 2013, allows for the structure of a $100M state-based venture capital program to be built out over five years.

Now let’s move on to how the Invest Georgia Exemption is allowed.

The Invest Georgia Exemption is possible as a result of federal exemption for intrastate offerings in section 3(a)(11) of the Securities Act of 1933 and SEC rule 147, 17 C.F.R. 230.147. I will not go into an explanation of these pre-existing exemptions, but rather point them out so that you may review them. It is important to understand that the federal provisions that Georgia is relying on are pre-existing and are not “new”.

It is my opinion that these specific rules related to the Invest Georgia Exemption have not been used much over the last few decades for five reasons:

–  Credit and capital for young companies has been relatively easy to access for a number of decades. This is no longer true.

–  These specific rules are very obscure and have been underutilized.

–  With the delay of the implementation of the JOBS Act, these specific rules are garnering more attention.

–  Use of these specific rules and regulations have been perceived to be burdensome, costly and more time-consuming than traditional sources of capital

– It is quite important to note that another obscure rule,  Rule 506 of Regulation D , which is often used to implement  “angel investing”,  has turned angel investing into an asset class and has helped fund thousands of companies over the last decade–but only “accredited” investors can invest in these companies.

So, Georgia’s crowdfunding rules are actually based on pre-existing, but underutilized, rules and regulations. I wonder what other obscure rules and regulations are out there that could be used to help fund Georgia companies!

(Special thanks to Vince Russo for ongoing guidance related to understanding of the IGE and for serving as “copy editor” of this particular post.)

Equity “Crowdfunding” is Legal in Georgia

26 Apr

Equity crowdfunding is legal in Georgia. Yes, legal. And, it is called the Invest Georgia Exemption. This is not the JOBS ACT.  It’s better than the JOBS Act.

 On December 8, 2011, the Georgia State Securities Division promulgated new rules known as the Invest Georgia Exemption (IGE).  (This is not Georgia General Assembly legislation, nor is legislation needed.)

Here are the important links:

http://www.sos.ga.gov/securities/sec-2012-13.pdf

 http://www.sos.ga.gov/securities/GUSA/pdf%20orders/Chapter%20590-4-2%20%20Exemptions.pdf

 Here is the important information:

  • Georgia-based, private companies can sell equity (shares of stock or debt) to Georgia based non-accredited residents of Georgia.
  • For-profit Georgia companies can raise up to $1 million annually from non-accredited and accredited investors.
  • Georgia-based Companies can advertise (solicit) capital raises in Georgia to Georgia-based residents .
  • Non-accredited Georgia residents can invest up to $10,000 per company.

I have been developing a platform to allow this type of equity investing. I’m doing this a little different than other private efforts. I would like to make this a community effort. We will create a pool of equity for those that help develop the site.

Here is what we need:

–  Developers interested in creating a web-based platform to allow online equity investing for Georgia companies.

– Whippersnapper securities lawyers not afraid to venture into new territories.

– Marketers who understand social media

– Companies that have been successful raising capital on KickStarter or IndieGoGo

Want to know more? Come to the TAG Corporate Development May 15 event on Crowdfunding.

Or,

Contact me at:

knox at keithmasseypartners.com

Let’s get the ball rolling on Georgia Crowdfunding!

Building a “Life Cycle” Funding Path for Young Companies in Georgia

8 Apr

A few people have recently asked me why I have spent so much time developing and promoting the Invest Georgia legislation in 2012 & 2013 and the Georgia Angel Investor Tax Credit legislation in 2010 and 2013. Well, like many things in life, I fell into my involvement with legislation doing something I love–working with investors and young companies in Georgia. The Georgia Angel Investor Tax Credit was developed when I was serving on the BOD of the Angel Capital Association from 2007-2010 and the Invest Georgia legislation was developed after I discovered the TNInvestco program in Tennessee through my friendship with Sid Chambless at the Nashville Angel Network.

Back to the subject at hand–the reason I spend time working on these current legislative initiatives: Over the  years, I have developed a long-term vision of how to help create what I call a  “life cycle” of funding for Georgia companies. Helping to create an angel investor community ( I was Managing Director of ATA & member 2001-2012) was a first step to fill the gap between “friends and family” funding and traditional venture capital funding. The Angel Tax Credit legislation to help incent Georgia angel investors and to help forge a public/partnership between state government and private investors was the second step. The third step is to continue to build that partnership, through the Invest Georgia legislation, between the public interests of the state and the private parties that invest “risk” capital and help grow Georgia companies. And the fourth step–an unanticipated, but welcome,  step–helping to create a crowdfunding community that will fit nicely between “friends and family” funding and angel investor funding

Here is a timeline based on my experiences in  funding young companies in Georgia:

Georgia Funding cycle circa 1995:            

– Friends and family funding

– Venture Capital                                                                                                      

Current funding cycle in Georgia circa 2010:

– Friends and family funding

– Angel  funding

– Venture Capital funding

Here is what I see in Georgia in 2014:

Friends and family funding

Crowdfunding

Angel funding

Invest Georgia

Venture Capital funding

How can you help? Invest in young Georgia based companies. Support the Invest Georgia and Georgia Angel Investor Tax Credit legislation–and come to the April 17 Crowdfunding Meetup at the Atlanta Tech Village

Georgia Angel Investor Tax Credit Renewed for 2014-2015

5 Apr

House Bill 318, passed on March 25 by the Georgia General Assembly during the 2013 Legislative Session, renewed the Georgia Angel Investor Tax Credit legislation that was initially passed in 2010. House Bill 318, if signed by the Governor, will renew the Georgia Angel Investor Tax Credit for two years,  2014 through 2015. Governor Deal has until May 7, 2013 to sign any legislation passed during the 2013 General Assembly. The sponsor of the bill, Rep. Ron Stephens (Savannah) has asked for a “sign date” for the bill.

Here is a link to the 2010 legislation signed on June 4, 2010 that gives this credit from 2011-through 2013 (Section 2):

http://www.legis.ga.gov/Legislation/20092010/107440.pdf

Here is a link to the 2013 bill that was passed March 25, 2013 (Section 6) and would extend the credit in years 2014 & 2015:

http://www.legis.ga.gov/Legislation/20132014/135871.pdf

The Georgia Angel Investor Tax Credit took effect in 2011 and provides an individual state tax credit of up $50,000 on an annual basis for individual angel investors who invest in early stage, “qualified” Georgia companies. The Tax Credit is available to be used by investors and “qualified” companies in the years 2011, 2012 and 2013. In the first 18 months of 2011 & 2012, 96 companies applied for the tax credit. Based on information collected in 1st Q, 2013, it looks as if applications are up 30% YOY from 2011 to 2012.

Let’s encourage Governor Deal to support early stage investing in Georgia and urge him to sign House Bill 318!

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Additional Information on the Angel Investor Tax Credit:

Companies that meet the following criteria are eligible to become a “qualified” company:

– Technology or manufacturing

– employs 20 or fewer

– less than 3 years old

– no more that $500,000 in annual revenue

– has not raised more that $1,000,000 in aggregate

“Qualified” Company Application:

Here is a link to the GADOR site for a “Qualified” company to apply: (IE browser seems to work fine, Chrome not so much)

https://etax.dor.ga.gov/inctax/taxcredits/TSD_Qualified_Business_Registration_Form_ITQBR.pdf

Application for Angel Investors that invested in a “Qualified” company in 2011:

https://etax.dor.ga.gov/inctax/Form_IT-QI-AP_Qualified_Investor_Tax_Credit_Preapproval_Form_1.2.13%20v1.3.pdf

The Invest Georgia program is a $100M state-based venture capital fund. The Invest Georgia fund would help to fund Georgia-based high growth companies in their early to growth stages of life.  Governor Deal has until May 7, 2013 to sign any legislation passed during the 2013 General Assembly. The sponsor of the bill, Rep. Ron Stephens (Savannah) has asked for a “sign date” for the bill.

Link to legislation: http://www.legis.ga.gov/legislation/en-US/Display/20132014/HB/318

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