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Our guest on this episode of The Wealthy Wellthy Podcast is Mark Roderick, an attorney who devotes most of his time to crowdfunding. Maybe you are like me in thinking that crowdfunding is pretty straightforward and self-explanatory. I mean, if your friend is looking to start a business and you want to support them, you can donate or invest through their crowdfunding page online and that’s that, right?
Every entrepreneur faces the stage in their business where they need to acquire capital, either from acquaintances, networking, angel investors, venture capitalists, or strategic partners. This process is messy and confusing, filled with regulations and stipulations that may make acquiring the capital more trouble than it is worth. This was partially due to the antiquated laws that were created in the aftermath of The Great Depression and were stifling in the modern economic climate. However, in 2012, the Jobs Act made it legal for entrepreneurs to advertise to raise capital. This opened up a whole new world for small business owners and others who were desperate to be able to connect more easily with potential investors as well as investors who were eager to find new opportunities.
During the interview, Mark distinguishes between the 3 kinds of crowdfunding: (1) to accredited investors only, (2) Regulation A to accredited or non accredited investors, and (3) Title 3 – which is the most common. He also talks about the factors that are most important from a legal perspective when you are determining which crowdfunding site to use to raise capital or to invest capital. It was also interesting to hear Mark spell out the 3 reasons why people invest through crowdfunding: (1) they want to support the company, (2) to do social good, and (3) to make money.
Mark even gave me some advice about a real estate deal I am considering and revealed that 90-95% of the capital exchanged through crowdfunding is for real estate transactions. Finally, he busted a couple of myths regarding the amount of risk involved in crowdfunding and whether money raised from others is subject to securities laws.
You can also click on the time stamps below to jump to those specific points in the conversation.
What We Covered
- [2:16] – Who is Mark Roderick?
- [3:28] – Mark describes the fragmented traditional ways of raising capital.
- [8:58] – Angel investors and how to present your “deck” to them.
- [11:08] – Working with venture capitalists and strategic partners.
- [13:31] – A brief history of the laws affecting capital.
- [22:34] – What does crowdfunding look like for startup entrepreneurs?
- [27:20] – How to find a regulated site to post your capital request on.
- [30:58] – Crowdfunding is the intersection of old and new school.
- [34:57] – Advice to keep in mind when you are using a crowdfunding site.
- [38:06] – Mark tells us 3 of the crowdfunding sites he works with.
- [40:08] – When should an entrepreneur hire an attorney during this process?
- [42:40]- The prevalence of real estate in the crowdfunding world.
- [53:24] – What message does Mark want to get out there?
- [56:17] – Mark busts 2 myths about crowdfunding.
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