Luncheon Recap: New Investment Innovations

 

Thank you all for joining us at our September Luncheon, where we discussed new models in the investment space – expanding funding options beyond traditional VC and angel investing. Our panelists covered crowdfunding, local stock exchanges, accredited investor platforms, royalty stream investments and foreign investor programs.

Below is the article PBN published covering the September Luncheon: Crowdfunding, angel syndicates and royalties offer new ways to invest in Hawaii.


 

Entrepreneurs in Hawaii have more opportunities for investment past the usual friends and families and venture capital sources.

Crowdfunding, royalty finance and syndicate funds were just some of the options discussed at the monthly Hawaii Venture Capital Association’s luncheon on Thursday.

HVCA board member Rob Robinson said most startups operate by bootstrapping, and do not receive money from venture capital or other investments. He said 90 percent of startups receive money from the three Fs – Founders, Friends and Families. For many innovative startups, the route to funding goes from bootstrapping to angel investors, venture capital, followed by non-financial corporations, equity markets and then commercial banks.

Darren Nunn, a partner at McCorriston Miller Mukai MacKinnon’s corporate and public finance groups, spoke about investment-based crowdfunding and the JOBS Act. Since September 2013, entrepreneurs using Rule 506 of Regulation D exemption can now advertise their offering and solicit investors, and up to 35 unaccredited investors will now be able to participate in Rule 506 offerings. To become an accredited investor, individuals must have $1 milion in net worth or $200,000 in annual revenue.

Laurens Laudowicz, founder of Juicies, managed one of the most successful Kickstarter campaigns out of Hawaii, raising over $750,000. Prior to that, Juicies, a company that makes colorful charging cables for iPhones or Android-based smartphones, ran a campaign and raised $23,000, and its founders saw it as a way to test the market, not a funding tool. Laudowicz said it’s a first step for a company, and it should not deter from other investment rounds. He said the type of businesses best suited for crowdfunding must make products that pertain to people who shop online and likes trying new products, and the founders must like communicating with those customers.

Steve Markowitz, an investor and member of Hawaii Angels, said he participates in AngelList, a platform that connects angel investors with others around the world. A new phenomenon on the platform is syndicates, which joins investors around common causes and can create a fund quickly.

While some see investing as a local act, syndicate investing bets on people you may not know. Markowtiz said investors can be as involved as much a they want, but some just see a hot deal and can see a quick return if they get into it. “There are great opportunities that present themselves,” he said.

Dustin Sellers of Koa Capital Partners LLC said he’s been an investor for 10 years and understands both the operator and investor point of view. He said when he asked friends and family for funding to start a company at age 24, it was a rite of passage. He thinks some people may not be doing their due diligence for some crowdfunding companies, but he feels like the due diligence is inherent with nieces and nephews because they are involved in their lives.

Michael North, co-founder of Pacific Royalties, discussed its concept where an investor will approach a company and say it will pay upfront costs in exchange for 5 percent of gross revenues over a period of time.

He said the companies they look for have three years of solid revenue and margins of 25 to 50 percent. An optimal royalty contract can be 20 years, but can be done in 10 years. North said the investor can recoup the initial investment during the first five years, with profits following.

Original Article by Jason Ubay Posted Here:

http://www.bizjournals.com/pacific/blog/2014/09/crowdfunding-angel-syndicates-and-royalties-offer.html