Trump Puts the Clown in Crowdfunding

Thanks to Donald Trump and the extraordinary spectacle played out at Trump Tower yesterday, we just got a glimpse of crowdfunding as a nightmare: people crammed against each other as they clawed the air for MONEY. 

As Trump put it, he wanted to take crowdfunding away from "Brooklyn hipsters." That he did, as a money-maddened crowd sprinkled with street people, brayed for bucks.

The site he is promoting, Fundanything.com, which is actually managed by his old pal, Learning Annex's Bill Zanker, borrows from Indiegogo.com. It accepts all comers and charges 9% if you don't make your goal and 5% if you do (vs. Indiegogo's 9% and 4%). 

The site is open to all comers and there is no community follow-up or any kind of vetting of deals. 

The only bright side to this picture is that Trump is offering to fund a choice few projects and so the publicity may bring some attention to other projects on the home page. 

If you are sorry you missed yesterday's spectacle, do not fret, the two expect to do live events around the country on the theory that it will bring more attention to the projects. The reality is likely to be more money stampedes - the ugly realization of our jobless recovery and our fascination with entrepreneurship-for-everyone.

Nevertheless, it is part of a trend. Last week, we reported that Shark Tank's Barbara Corcoran joined the board of RockthePost.com, a pioneering equity crowdfunding site featured on our podcast, The Entrepreneur Show. 

So - do we continue to be amazed at the miracle of crowdfunding - the wisdom of the public as it puts its trust in the ideas of a good few? What the JOBS act is about to turn it into a wealth-sharing vehicle for the rest of us?

Or, are we about to see it transformed into a freakshow to amuse the rich whenever they feel like sprinkling bills before beggars? A massive joke where people compete against each with sob stories or half-baked ideas in search for suckers. A high tech way of washing your windshield?

The answer depends on which side of the velvet rope you were standing last Wednesday at Trump Tower.

Additional stories in the Verge and Techcrunch.

Report from the VC Outlook iBreakfast

More Funding, Low Valuations, Getting M&A Ready

With a fast-growing entrepreneur environment - thanks to the somewhat recovering economy, this is a good time to go back to investors and find out what they are looking for. As we know, valuations are low, exits are limited but the business idea mill goes on nonetheless.

Now that the 40 plus set is the fastest-growing portion of the entrepreneurial class, the fundable ideas tend to be niche solutions. Geoff Judge talked about his own pre-investor record at 24/7 Media and true to form, is looking at investing in new kinds of ad networks - especially ones that are focused on specific high-growth areas.

Juan Lopez-Alcarcel described a kind of localization ploy that is quite common in Europe. When a US restaurant reservation company tried to spend money opening up in Europe, the locals quickly demurred when they realized their businesses would now appear on record and therefore subject to taxes. So a local entrepreneur stepped in with a similar idea but without the record-keeping. Often, local knock-offs like the first German version of eBay get acquired - or they just do well by using local knowledge.

Michael Kurdziel talked about exits which today, are mostly M&A. However, VC investment appears to be growing and new markets are emerging to trade and therefore create liquidity for founders stock. The bottom line, however, seems to be: find out what companies are buying and make your start-up M&A ready!


About the Speakers
Michael Kurdziel is the Managing Director of Landmark Ventures. He was a Partner and Managing Director with ARC Investment Partners, a Director at Activision, Inc., and a founding member of DealerTrack (Nasdaq: TRAK).

Juan Lopez-Valcarcel the Managing Director for The Digital
Sunrise Group, a new incubator and angel investment group for European digital startups. He was a VP in the Digital Media team at NBC Universal and the General Manager for iVillage.com

Geoff Judge is an active investor in early stage companies and member of The NY Angels. He was the Chief Revenue Officer of Piczo and COO of Preclick, a Digital Photography software firm with clients such as Hewlett Packard, Wal-Mart, Costco, and Sandisk.

Report from July - New VC Vistas iBreakfast

"Who Moved My VC?"

Steven Arnold, Arnold IT
Allan Young, PCMexchange
Slava Rubin, IndieGoGo

Open Season for Open Source
Entrepreneurs looking for new funding got an eye-opener to the future at the July iBreakfast. Top of the list - according to Steve Arnold, is that open-source is becoming a mandate for all government-related RFPs. If you are going after of City, State or Federal money - these are the magic words.

Crowdfunding
For Entrepreneurs looking beyond the tight VC market - where many, many deals are chasing very selective investors offering low valuations - PCMexchange holds hope for the future. Here Entrepreneurs can raise money directly from pools of investors online. While this technique has been tried (Wit Capital to Prosper) sooner or later the SEC has moved in to shut them down.

But now we are seeing a new way of dealing with this.

PCM Exchange uses a new combination of techniques - it is founded by a broker-dealer and only accredited investors get access to the site. But it is it open to all entrepreneurs. The advantages for investors are that they can vet the entrepreneurs as a group - saving them from multiple due diligences. For the investors, the site will offer a kind of stock exchange thereby offering liquidity for their holdings.

IndieGoGo offers a crowfunding source for film and digital content. The trick here is that the pubic does not buy equity on the film only the equivalent of sponsorship or bragging rights.

Additional report by Guilherme Cunha

The VC Outlook - Report from June 24 Event

Charlie Federman, Crossbar Capital • Jeanne Sullivan, Co-Chair, StarVest • Owen Davis, NYC Seed • Ben Boissevain, Agile Equity • F. Morgan Rodd, Milestone Ventures

We usually do a VC Outlook iBreakfast once or perhaps twice a year – and they are good. But somehow the June 24th event was special in an extraordinary way.

Maybe it’s the strange times we are in. People really needed to understand where we are headed and so Investors, by telling us where they are placing their bets – are also giving us a view into the future.

It is also a tricky time because, on the one hand, there appears to be a rising tide of private equity. On the other hand, we see a lot of entrepreneurs but for all their enthusiasm, also lack a vision about the future. Most of all, entrepreneurs may not be thinking of what the Venture marketplace wants – only what they want to do.

We understand that deals have become cheaper and investors can cherry-pick them in a way they may not have been able to do in the past. But what are they looking for?

So this iBreakfast was a wake-up call to “game” the Venture marketplace – getting your plan in line with what the market wants instead of wondering what’s wrong with the market…...

According this iBreakfast - here is the lay of the land:

Most of the exits are closed – the IPO market is all but dead, few investors speak of building a great profitable company in the old enterprise-building sense of the word. M&A is the main exit. Fortunately, many companies have strong balance sheets and after having laid off staff, they are finding that buying start-ups is the cheapest form of R&D. Great. Perhaps even better, foreign companies too, are eyeing the US market and they will often pay a premium if they feel they can get market entry.

So what are investors looking for? According to Jeanne Sullivan, the companies they look for include tech-enabled service businesses, platforms and any high perceived value service that once required custom tailoring, that can be delivered in a mass format is in demand.

Charlie Federman of Crossbar, a noted early stage investor looks for the first new idea in a marketplace. First to market is big deal and if properly executed, usually carries over in the long term. He especially likes ones that "export deflation" - i.e. offer a really low-cost alternative to a current business under price pressure. More importly, he looks for entrepreneurs who can adapt, since most start-ups find their real opportunity later. The business they end up is never quite what they started with. Somewhere, they’re going to have to take a left turn. Will they be ready to respond to that…..?

Owen Davis has analyzed various investment deals and has laid out a kind of roadmap that would be an invaluable guide for an entrepreneur to determine which sector has the highest probability of raising capital in the New York area. Hint: social media and communities highest pitch topic – least invested in.

(Note to Entrepreneurs: check back with us for the best bets.)

Morgan Rodd noted that Milestone Ventures was increasingly interested in tech-enabled medical services.

Based on the surge of investor/entrepreneurial interest we will be producing a new series of Start-Up bootcamps, business and deal structure sessions and more investor meetings.

View Presentations
Ben Boissevain - Agile Equity