DANIEL GORFINE DIRECTOR OF FINANCIAL MARKET POLICY AND LEGAL COUNSEL, MILKEN INSTITUTE DECEMBER 4, 2013 HBSAB Panel: Crowdfunding Part II
Sep 14, 2014
D A N I E L G O R F I N E
D I R E C T O R O F F I N A N C I A L M A R K ET P O L I C Y A N D L E G A L C O U N S E L , M I L K E N I N S T I T U T E
D E C E M B E R 4 , 2 0 1 3
HBSAB Panel: Crowdfunding Part II
State of Angel Capital
30
15.7
18.1
22.5 23.1
25.6 26
19.2 17.6
20.1
22.5 22.9
0
10000
20000
30000
40000
50000
60000
70000
80000
0
5
10
15
20
25
30
35
Total Angel Investment 2001-2012
Sum of Total Angel Investment (in billions) Sum of Total Ventures Funded
Data Source: UNH Center for Venture Research
Bill
ion
s
State of Venture Capital
8.01 11.35
15.01
21.47
54.85
105.12
40.96
22.17 19.69
23.26 23.59 27.59
31.93 29.97
20.25 23.29
29.67 26.96
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
0
20
40
60
80
100
120
Total Venture Capital Investment 1995-2012
Sum of Total Venture Capital Investment Sum of Total Number of Deals
Data Source: NVCA/ PWC Moneytree Report
Bill
ion
s
Venture Capital Moving Away from Seed
Data Source: NVCA/ PWC Moneytree Report
0
2
4
6
8
10
12
14
16
18
Bill
ion
s
VC Investment 2000-2013Q3
Startup/Seed Avg=$3mil
Early Stage Avg=$5mil
Expansion Avg=$8mil
Later Stage Avg=$10mil
State of Small Business Lending
Source: Thomson Reuters/PayNet Small Business Lending Index
60
70
80
90
100
110
120
130
140
Jan
-05
Ap
r-0
5
Jul-
05
Oct
-05
Jan
-06
Ap
r-0
6
Jul-
06
Oct
-06
Jan
-07
Ap
r-0
7
Jul-
07
Oct
-07
Jan
-08
Ap
r-0
8
Jul-
08
Oct
-08
Jan
-09
Ap
r-0
9
Jul-
09
Oct
-09
Jan
-10
Ap
r-1
0
Jul-
10
Oct
-10
Jan
-11
Ap
r-1
1
Jul-
11
Oct
-11
Jan
-12
Ap
r-1
2
Jul-
12
Oct
-12
Jan
-13
Ap
r-1
3
Jul-
13
Volume of New Commercial Loans and Leases to Small Businesses Q1 2005-Q2 2013
Sources of Startup Financing Limited
Source: Corporate Executive Board, US Small Business Administration
25
0.3
1
4
7
7
10
60
11
0.7
3
9
10
19
11
62
0 10 20 30 40 50 60 70
None needed
Venture Capital
Government Loan
Home equity
Other personal/family assets
Bank Loan
Credit Card
Personal/Family Savings
Sources of Startup Financing (% of firms)
Employers SolePropreitor
US IPO Market: Small vs. Big Companies
US IPOs with Pre-IPO Annual Sales Less Than or Greater Than $50m/Year
Source: SEC Advisory Committee on Small and Emerging Companies, September 2012; Ritter, University of Florida
Public vs. Private Market
Source: Ivanov, SEC
Aggregate Capital Raise 2009-2012 by Offering Method
Bill
ion
s
2012: Public Market Totaled $1.2tn Private Market Totaled $1.7tn
New Capital Access Tools
© 2013 Milken Institute
© 2013 Milken Institute
Funding Landscape
Angel Investment: Range based on lowest and highest total annual Angel investment per deal from 2001-2012, UNH data VC
Investment: Range based on lowest and highest total annual VC investment per deal from 1995-2012, NVCA data
Investment Stage range based on lowest and highest total annual VC investment per stage per deal from
1995-2012, NVCA data
Startup/Seed: $3.2mil Early Stage: $5.0mil; Expansion: $8.4mil; Later Stage : $10.3mil
Data Source: ACA, NVCA © 2013 Milken Institute
Donation-Based Crowdfunding in 2012
Source: TechCrunch, massoultion
Crowd Investing: Title III JOBS Act
Source: Fundable, Earn MBA degree.
Crowd Investing Disclosures Vary by
Offering Amount
Crowd Investing Offering Amount (including offerings in preceding 12 mo.)
Disclosure Requirements
Up to $100,000 Most recent income tax returns; financial statements certified by issuer’s executive officer
$100,000 - $500,000 Financial statements reviewed by independent public accountant
$500,000+ Audited financial statements
Source: sec.gov
SEC Proposed Rules
Investment Advice/ Recommendations
Investor Education Requirement
Portal Compensation
Models
Title III
Ongoing Disclosures
Rule 506(c) Investing
Title II of the JOBS Act
Ban on General Solicitation Lifted
Accredited Investor Verification Required
Reasonable Belief Investor Accredited
Proposed Rules
Regulation A+
Data Source: WR Hambrecht + Co, Dealogic
11% 15%
9% 4%
12% 8% 6% 9% 3% 3% 1% 3%
10% 10% 6%
19%
12% 15%
8% 4%
0% 4%
8% 5%
25% 24% 29% 30%
27% 25% 28% 30%
18%
34%
19%
41%
54% 51%
56%
47% 49% 52%
58% 57%
79%
59%
73%
51%
IPOS in US % of Total Number of Deals
Small Company IPOs have declined as a share of overall market Total filing expenses under Regulation A+ are estimated to decrease by
50% when compared to smaller reporting company S-1 filings, and by 71% when compared to traditional S-1 filings
$100+mil
$50-100mil
$25-50mil
$0-50mil