An intelligently planned, well-funded, and professionally executed crowdfunding campaign should be successful in raising the desired funds every time. Does that sound controversial? Well, in this podcast, attorney Irwin Stein from “Law and Economics in Capital Markets” explains why he believes this to be true and gives tips and pointers on the best strategies issuers need to implement to drive eyeballs to their offerings. He also details the biggest reason crowdfunding campaigns fail (it’s so obvious, yet it flies completely under the radar for most business CEOs)
The crowdfunding industry isn’t all wine and roses. Just because you see “expert” on a business card doesn’t make that person an expert. As Mr. Stein mentions on the podcast, the truth about doing crowdfunding correctly is sometimes hard to see. Campaign portals promoting ridiculously bad valuations (and some even being expelled as a result!), social media expectations being set way too high, companies selling wishful thinking rather than solid economic principles to their prospective investors, and crowdfunding experts who have no idea what they’re doing with respect to marketing campaigns are just a few examples of what the crowdfunding industry needs to correct. When you listen to this podcast, you’ll learn exactly why the industry drastically needs expertise in corporate finance as well as a true professional association that educates both issuers and investors.
Successful crowdfunding campaigns have two things in common: they offer investors attractive returns commensurate with a high-risk investment, and the companies doing the offering engage the services of professional marketing companies with specific experience in investment crowdfunding. Do that right, and you will succeed every time! So, take it from Irwin: Never take marketing advice from a lawyer! Hire smart marketing people who do marketing well the right way instead… AND make sure you put enough time and money behind your marketing campaign to make it work!
Read his blog at LawEconomicsCapital.com
ABOUT OUR GUEST: Irwin Stein
Irwin Stein has conducted due diligence investigations working with top-tier law firms, accountants and investment bankers preparing public and private offerings.
Irwin earned a B.A. from Rutgers University in American Economic History and a JD from the New York Law School. He has been a member of the New York bar since 1975 and was trained and licensed in all aspects of financial services industry operations as an in-house attorney for Paine Webber Jackson and Curtis, Inc. and EF Hutton & Company.
From 1979-1987 he engaged in the private practice of law, representing financial industry firms, companies seeking capital and professional traders and investors. In 1988-89 Irwin Stein served as General Counsel of a real estate firm which operated multi-family housing units and assisted-living facilities worth $1.5 billion in 23 states. During his tenure, he supervised 2 public and 5 private securities offerings.
For ten years beginning in 1990, Mr. Stein taught Economics, Law and Economics, Finance and related courses, as an Adjunct Assistant Professor, to business school students at Golden Gate University in San Francisco. He was a member of the faculty budget committee for 5 years, serving one year as its chairperson. At the same time, he became active as an expert witness, helping litigants to dissect securities offerings that had failed.
He has qualified and testified as an expert witness more than 100 times. From 2001-2014 Mr. Stein was a full-time advocate representing hundreds of investors who had lost their money in the 2001 tech wreck and 2008 financial meltdown.
IMPORTANT!
All information provided is for informational purposes only. Mapable USA is not a registered broker-dealer, funding portal, or investment advisor. This information presented on this website/podcast is not intended as legal or investment advice for anyone to make an investment in any particular company and is not intended for any companies to rely on this information to form an opinion to go public or not to go public or to do any type of offering of securities. Any information presented is not an offer or solicitation to purchase or sell any securities or financial products. None of the information on the Mapable USA podcast or website takes into account any individual person’s personal objectives, financial situation, needs, or particular circumstances. You must check with a securities attorney to find out if an offering is for you, or if you are going to be in the business of selling any type of securities, you need to make sure you are following your state and federal legislative law so you do not get into any troubles. Do not use the opinions as stated on this show as any way to form an opinion as what is wrong or right or what could be done for your business or as an investor. Mapable, LLC recommends you obtain your own financial, legal, and taxation advice before making any financial investment decision.
Irwin Stein’s focus on valuation is highly relevant. Here’s the Foreword — https://lnkd.in/dpcUdBX — that he wrote for my book, “The Fairshare Model: A Performance-Based Capital Structure for Venture-Stage Initial Public Offerings.”
Its name describes its purpose: to balance and align the interests of investors and employees—capital and labor. It has implications for how to attract funding to companies that have poor access to equity funding but who have the ability to attract an affinity group of public investors. More significantly, it has potential to help companies attract and manage human capital.
The Fairshare Model was conceived to deal with the uncertainty involved in establishing a value for a venture-stage company. There are ways to mitigate the risk of getting it wrong in a private offering, deal terms. But there is no equivalent in an IPO.
The Fairshare Model changes that with a deal structure that places no value on future performance. It does that by providing shares for future performance that vote but cannot trade; they convert into the tradable stock based on performance milestones.
An obstacle to the most accessible form of crowdfunding, what is called Regulation Crowdfunding, since it’s inception in the US almost exactly five years ago, is that the promoters of it fail to integrate, and in fact denigrate, that which has been successful in raising capital for emerging growth companies and startups for over seven decades. Professor Stein, as someone who’s been doing this for more than four of those decades, puts it out there. There is much to be learned from what has worked well and crowdfunding has a space, but not an exclusive one, in the capital formation spectrum. There is no reason a well run campaign should fail to capture its goals (and often more). Professor Stein points out what it takes and it bears a listen.