The JOBS Act: Crowdfunding Guide to Small Businesses and Startups PDF
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The JOBS Act Crowdfunding Guide to Small Businesses and Startups ― Second Edition ― William Michael Cunningham THE JOBS ACT CROWDFUNDING GUIDE TO SMALL BUSINESSES AND STARTUPS SECOND EDITION William Michael Cunningham The JOBS Act: Crowdfunding Guide to Small Businesses and Startups William Michael Cunningham Temple Hills, Maryland, USA ISBN-13 (pbk): 978-1-4842-2408-3 ISBN-13 (electronic): 978-1-4842-2409-0 DOI 10.1007/978-1-4842-2409-0 Library of Congress Control Number: 2016961721 Copyright © 2016 by William Michael Cunningham This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. 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Please visit us at www.apress.com to sign up for newsletters and discounts on future purchases. —The Apress Business Team For my mother, always Contents Foreword ix About the Author xi Acknowledgments xiii Introduction xv Part I: Summary of the JOBS Act 1 Chapter 1: The JOBS Act 3 Chapter 2: Startup Financing Environment 37 Chapter 3: Emerging Growth Companies 51 Part II: Disclosure and Crowdfunding in the JOBS Act 79 Chapter 4: A ccounting, Reporting, and Other Standards in the JOBS Act 81 Chapter 5: Crowdfunding 97 Chapter 6: What Title III Crowdfunding Costs 135 Chapter 7: Portals 143 Part III: The JOBS Act, by Title 161 Chapter 8: Title I 163 Chapter 9: Title II 175 Chapter 10: Title III 179 Chapter 11: Title IV 195 Chapter 12: Title V 199 Chapter 13: Title VI 203 Chapter 14: Title VII 207 Appendix A: Form C 213 Appendix B: Form 1-A 217 Appendix C: Sample Pitch Deck 219 Index 231 Foreword What’s your investment broker doing? Right now … really, what are they doing? Are they busy managing your money, making the best investments to secure your retirement—or are they shopping for a yacht—or a new pent- house apartment in New York, London, or San Francisco? What we now know is that following the 2008 recession, Wall Street (your broker) got bailed out. What did everyone else who lost money get? Did you lose your retirement nest egg? What did you get? Did you know that if you happen to be black, in particular a woman, chances are that if you had a 401(k) or investment portfolio, it lost some 80 percent of its value during the reces- sion and that it will take the rest of your life to get it back—if at all? Are you ready to work through your retirement? For decades, poor people and their communities have suffered at the hands of predatory banks and investment firms. While banks and investment firms have been raking in big dollars, making big profits for themselves and the super rich—poor people have been left behind. However, in the last few years, a movement has been brewing. Poor people, white, black and brown, are slowly realizing the power of their dollar. They are showing the world that the dollar they hold is the same shade of green as the dollar that wealthy investors hold, and that they have the power to effect change in a magnificent way. Enter crowdfunding—a way for the everyday entrepreneur and small business to raise investment capital from anyone, without selling their souls to banks, hedge funds, venture capitalists, and so-called “angel investors.” Since the law President Obama signed went into effect on May 16, 2016, equity crowdfund- ing, driven by the power of the average person’s investment dollar, has shown exponential growth. However, even with this exponential growth, driven by everyday investors, the question arises: how are black and brown communities benefiting from this new investment vehicle? More important, where are they? William Michael Cunningham, a pioneer of the movement long before crowd- funding was a “thing,” has been working diligently to bring awareness of crowd- funding and its benefits to black, brown, and minority communities. Through his research, Bill has made widely known what is no secret in underrepre- sented communities—that although black buying power surpasses $1 trillion, black communities rarely benefit from the boost the economy receives from their dollars. x Foreword In this second edition, Bill brilliantly explains what is keeping crowdfunding alive in communities all over the nation. (What he may not mention is that the majority of the funding on a crowdfunding web site he ran, Blackcrowdfunding. net, came from black women like myself.) To learn more about the world of crowdfunding and equity crowdfunding and what it can do for you, grab onto your seat and be prepared to find out how it will fundamentally change investing and finance around the globe—and around you. —Maureen L. Murat, JD CEO, Crowdie Advisors, LLC About the Author William Michael Cunningham is an econo- mist, investment advisor, researcher, and social investing policy analyst. Cunningham researches, evaluates, develops, and creates specific socially responsible investments. A former securities broker and institutional salesman, he has worked with pension fund trustees, investment manag- ers, community activists, government agencies, and financial industry organizations to create and implement social and community invest- ing initiatives. Cunningham has testified before the Ways and Means and Financial Services Committees of the US House of Representatives. In an October 1998 petition to the United States Court of Appeals for the District of Columbia Circuit, he opposed the elimination of the Glass–Steagall Act, citing evidence that grow- ing financial market malfeasance greatly reduced the safety and integrity of large financial institutions. He warned that getting rid of the law was sure to bring about a crisis. On December 22, 2003, on December 22, 2005 (in a meeting with the Division of Market Regulation), and on February 6, 2006, he warned the SEC about the possibility of systemwide economic and market failure. On June 7, 2007, Mr. Cunningham proposed the creation of the Microcredit Stock Exchange (an early form of crowdfunding) to the Government of the District of Columbia in a meeting with the Office of the Deputy Mayor for Planning and Economic Development and the Office of the City Council Chairman. The proposal was not accepted. On June 17, 2015, the US Court of Appeals for the District of Columbia Circuit recognized Mr. Cunningham as a friend of the court in an action (15-1150) that two state securities regulators brought against the US Securities and Exchange Commission (SEC). His brief concludes by suggesting the SEC immediately implement Title III of the JOBS Act. The SEC implemented Title III shortly thereafter. On June 16, 2016, the US Court of Appeals for the District of Columbia Circuit again recognized Mr. Cunningham as a friend of the court in Met Life vs. the Financial Stability Oversight Council (16-5086), “MetLife’s challenge to xii About the Author its designation as a systemically important financial institution under Dodd- Frank.” Mr. Cunningham’s brief noted the public’s interest in financial stability. And on July 15, 2016, Mr. Cunningham was recognized as a friend of the court in National Association of Fixed Annuities vs. the Department of Labor(16-cv-1035), a case in the US District Court for the District of Columbia challenging the ability of the Department of Labor to “raise investment advice standards” as they apply to retirement accounts. Mr. Cunningham supported the public interest and the department. Mr. Cunningham has been involved in the provision of online resources to small businesses for more than 20 years, posting his first web site in 1995. He is an unaffiliated member at the Internet Corporation for Assigned Names and Numbers (ICANN). On December 28, 2014, he released the Top 50 Crowdfunding Campaigns: Fifty Most Successful Crowdfunding Campaigns (Kindle Edition, www.amazon.com/ Top-50-Crowdfunding-Campaigns-Successful-ebook/dp/B00RKK4NL0). Mr. Cunningham holds an MA in economics from the University of Chicago, as well as an MBA in finance from the university’s Booth School of Business. He holds a BA in economics from Howard University.
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