Crowdfunding Industry Forms Leadership Group to Pursue Development of Industry Self-Regulatory Organization

Investor Protection, SEC Collaboration and Market Integrity Top the Agenda

April 5, 2012 (Washington, DC) – Today as President Obama signed the JOBS Act into law, a group of 13 equity and debt crowdfunding platforms and industry experts announced a leadership group to pursue the development of self-regulation for the crowdfunding industry. The JOBS Act requires that all equity and debt crowdfunding platforms be a member of a national securities association. This leadership group will explore the various paths to meet that requirement in ways that protect investors and support a vibrant industry. The leadership group will include members of the crowdfunding industry itself in collaboration with legal, securities and SEC experts; many of which were leading the charge to advocate for the legislation.
The group sent a letter to the President regarding its intent. Link to the letter is here;

Crowdfunding will provide the opportunity for regular Americans to invest small amounts of money in businesses they know and entrepreneurs they believe in. According to Kauffman Foundation research these small companies are the source of net new jobs in the economy. Crowdfunding is not a new concept. Reward or perk-based crowdfunding has been successfully raising capital for several years.

“The rapid formation of this leadership group demonstrates how focused the crowdfunding community is on protecting investors as they navigate this new class of investments,” said Karen Kerrigan President & CEO of the Small Business & Entrepreneurship Council. “We look forward to the impact Crowdfunding will have on increasing jobs and American innovation.”

The goal of the leadership group is to agree upon a standard set of principles as well as explore the development of a robust industry regulator. This group will also begin to collaborate with the SEC in its nine-month rule making process to enact the rules for crowdfunding. The group will create principles to:

Establish strong protections for investors in the form of an Investor’s Bill of Rights, including tests to assess investors understanding of risk, criminal background checks on issuers, and adequate disclosures by issuers;
Ensure confidentiality of investors’ personal financial information;
Ensure that investors do not exceed statutory investment limits by implementing standardized reporting and communication among platforms;
Establish standard communication processes for transparent flow of information between the issuer, the investor, the intermediary and the regulatory agency;
Develop a code of conduct for crowdfunding platforms, with enforcement mechanisms to punish bad actors;
Create a recognizable brand common to trustworthy intermediaries (akin to VeriSign or BBB).

“After 15 months of hard work, we are very excited that equity and debt crowdfunding will soon be active in the United States. We deeply appreciate the leadership that The President has provided on this issue and we thank the House and Senate for engaging with us in crafting this legislation. Now is the time to ensure that all the good intentions of this legislation can be written into regulation that protects investors and enables a strong crowdfunding market to form” remarked Jason Best co-author of the CrowdFund Investing Framework in the JOBS Act and a founding member of the leadership group.

“The availability of crowdfunding as a capital formation option for entrepreneurs and small businesses is a huge opportunity for our economy to create innovative new products and services” said Carl Esposti, founder of Crowdsourcing.org and leader of the CAPS Accreditation Program for crowdfunding platforms and a founding member of the leadership group.

This leadership group will build a united industry voice that will focus on: collaborating with the SEC, educating investors and entrepreneurs, being a strong industry advocate and building a vibrant crowdfunding community. The group will hold monthly meetings and must work carefully and without delay to help launch equity crowdfunding in the US so entrepreneurs can innovate and create new jobs.

Founding leadership group members (in alphabetical order) include:
• CAPS Crowdfunding Accreditation Program
• Crowdfunder
• Funding Roadmap
• Gate Technology &
• Indiegogo
• Launcht
• Motaavi
• RocketHub
• Soho Loft Capital Creation Events
• Somolend
• Startup Exemption
• Wefunder
• The founders of ProFounder Dana Mauriello & Jessica Jackley

About the group leaders (Startup Exemption)
Jason W. Best, Zak Cassady-Dorion and Sherwood Neiss are the co-authors of the CrowdFund Investing (CFI) framework. This framework was proposed as an exemption under Regulation D Securities Offerings to allow startups and small businesses to raise a limited amount of seed and growth capital from their social networks using SEC-registered websites. The framework was in line with the two Crowdfunding bills passed by Congress as well as President Obama’s proposal, passing the U.S. House on November 4, 2011 (407-17) and the U.S. Senate on March 22, 2012 as part of the JOBS Act (73-26). As leaders of the legislative change for Crowdfunding in Washington, they are very pleased to collaborate with industry experts in forming this leadership group. For more information visit: http://www.startupexemption.com.
Media Contacts: Jason W. Best (415) 999-2271, Jason@startupexemption.com or Sherwood Neiss – (202) 247-7182, sherwood@startupexemption.com

About the CAPS program
The Crowdfunding Accreditation for Platform Standards (CAPS) program, an initiative by Crowdsourcing.org, establishes standards for a wide range of crowdfunding operations, including both equity-, debt-, and donation-based portals, and aims to protect investors from fraud and to promote best practices for crowdfunding portals. CAPS-accredited platforms are those that have met qualification criteria in four areas: operational transparency, security of information and payments, platform functionality, and operational procedures. Amendments or changes to the standards are voted in quarterly by the CAPS Council – the governing body of the program.
Media Contact: Jennifer Moebius (617) 922-8004, jennifer@moebiusink.com
CAPS Program Director: Kevin Berg Grell, PhD, kevin@crowdsourcing.org

About Crowdfunder
Crowdfunder is the Business Crowdfunding platform that will enable U.S. startups and small businesses to raise funds through equity and revenue-based investment. For more information visit: crowdfunder.com.
Media Contact: Jean-Michel Arnoult 
(347) 804-8359, 
jm@crowdfunder.com

About Funding Roadmap
Funding Roadmap business plan and due diligence reporting system on-the-cloud provides real-time planning, reporting, analysis, compliance, transparency and GAAP compliant financial statements. It gives you a simpler and easier way to comply with individual state and national security laws and future reporting as you successfully crowd fund your business on any crowdfunding site. http://www.fundingroadmap.com
Media Contact: Ruth Hedges (213) 276-6266, fundingroadmap@aol.com

About Gate Technology
GATE Technologies is an innovative financial technology company creating a new market infrastructure for bringing efficiency, transparency to the unstructured global alternative asset markets. The company offers fully automated, customizable solutions for qualified investors with value-added content and analytics, transparent execution, and dematerialized settlement, clearing, and depository functions. GATE Developing Markets will work to create the first global common infrastructure for illiquid securities, with a goal of enabling all market participants to buy and sell transferable securities. http://www.gatetechnologies.com
Media Contact: Vince Molinari (646) 449-7990, vmolinari@gatetechnologies.com

About IndieGoGo
Indiegogo is the leading global platform for crowdfunding, empowering anyone, anywhere, to raise money for anything. Millions of dollars each month are raised on Indiegogo and almost every country in the world has been represented. Founded in 2008, the company has appeared on Oprah, Today, and the BBC, as well as in the Wall Street Journal, The Guardian, and The New York Times. IndieGoGo is headquartered in San Francisco, CA with offices in Los Angeles, CA and New York, NY. For more information, visit http://www.indiegogo.com and follow at http://www.twitter.com/indiegogo and http://www.facebook.com/indiegogo.
Media Contact Rose Levy, Goldin Solutions 646-660-8641

About Launcht
Launcht creates white label crowdfunding platforms and technology solutions for the donation and future equity crowdfunding industries. Launcht also hosts a crowdfunding marketplace for social entrepreneurs.
Media Contact: Spencer S. Taylor (802) 238-0319, spencer@launcht.com

About Motaavi
Motaavi will be an integrated trading platform and exchange where anyone can invest and trade shares of early stage companies. To learn more about the platform, visit: http://www.motaavi.com
Media Contact: Melanie Plageman (513) 680-2653, melanie@motaavi.com

About RocketHub
RocketHub (www.RocketHub.com) is one of the world’s top donation-based crowdfunding platforms that has been featured in the Wall Street Journal, The New York Times, NPR, Wired, The Economist, CNN, The Washington Post, ABC News, USA Today, etc. while helping thousands of rewards based funding campaigns raise millions of dollars.
Media Contact: Brian Meece (646) 761-2205, brian@rockethub.com

About Soho Loft Capital Creation Events
The Soho Loft Capital Creation (TSLCC) Event Series is the only global event platform where accredited investors; accomplished angels; microfinancing groups; CIOs of investors; select merchant and investment bankers; VCs; family offices; incubators; private equity firms; pre-IPO mutual funds; secondary stock specialists; seasoned entrepreneurs; tax and legal experts and equity analysts from across the world assemble in order to exchange ideas, discourse and opportunities that will help reshape the capital markets and stimulate economic growth. Our mission is to help develop the infrastructure of the rising private markets so that it can mature into a viable and functional marketplace that facilitates capital formation, innovation, expansion and job creation. For additional information please visit us at http://thesoholoft.com and facebook.com/TheSohoLoftevents.
Media Contact: Dara Albright (770) 880-0801, dsa@nowstreetmedia.com

About Somolend
At SoMoLend, we make investing in your online community simple, affordable, and social. SoMo is a Web- and mobile-based peer-to-peer lending website that uses patent-pending lending technology executed within a hyper-localized geographic scope to connect small-business borrowers with individual and organizational investors. This user-friendly technology can be accessed worldwide. Investors lend money directly to borrowers through a Web-based application, which then packages the loans and sells them as notes, bypassing banks and credit-card issuers. For more information, visit https://www.somolend.com/.
Media Contact: Candace Klein (859) 803-9499, candace@somolend.com

About Wefunder
Wefunder will revolutionize how startups start and grow. We will give all Americans the opportunity to invest in companies they believe in, and own a piece of the journey to success.
Media Contact: Michael Norman (401) 477-3647, mike@wefunder.com

LETTER TO THE PRESIDENT OF THE UNITED STATES

The Crowdfunding Leadership Group

President Barack Obama
The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Thank you for your leadership on the bipartisan JOBS Act and for signing it into law. This legislation is the beginning of Web 3.0 where social media meets community financing. It is a powerful piece of legislation that will spur entrepreneurship and create jobs. We would like to speak to the industry’s efforts to come together at this nascent time and speak with a unified voice. We are sincere in our efforts to ensure that this legislation lives up to its intention, that an efficient marketplace develops and investors are protected.

We represent a group of 13 top equity and debt crowdfunding platforms and industry experts that are forming a leadership group to develop appropriate self-regulation for the crowdfunding industry. As you know, the JOBS Act requires that all crowdfunding platforms be a member of a national securities
association. This leadership group will explore the various paths to meet that requirement in ways that protect investors and support a vibrant industry. The leadership group will include members of the crowdfunding industry itself in collaboration with legal, securities and SEC experts.

Crowdfunding will provide the opportunity for regular Americans to invest small amounts of money in businesses they know and entrepreneurs they believe in. According to Kauffman Foundation research these small companies are the source of net new jobs in the economy.

The rapid formation of this leadership group clearly demonstrates how focused the crowdfunding community is on protecting investors as they navigate this new class of investments. We are pleased to join this effort in providing access to capital for small businesses while protecting investors. The goal of the leadership group is to agree upon a standard set of principles as well as pursue the development of a robust industry regulator. This group will also begin to collaborate with the SEC in its nine-month rulemaking process to enact the rules for crowdfunding. The group will create principles to:
● Establish strong protections for investors in the form of an Investor’s Bill of Rights, including tests to assess investors understanding of risk, criminal background checks on issuers, and adequate disclosures by issuers;
● Ensure confidentiality of investors’ personal financial information;
● Ensure that investors do not exceed statutory investment limits by implementing standardized reporting and communication among platforms;
● Establish standard communication processes for transparent flow of information between the issuer, the investor, the intermediary and the regulatory agency;
● Develop a code of conduct for crowdfunding platforms, with enforcement mechanisms to punish bad actors;
● Create a recognizable brand common to trustworthy intermediaries (akin to VeriSign or BBB).

After 15 months of hard work, all members of this leadership group are very excited that crowdfunding will soon be active in the United States. We deeply appreciate your leadership on this issue and we thank the House and Senate for engaging with us in crafting this legislation. Now is the time to ensure
that all the good intentions of this legislation can be written into regulation that protects investors and enables a strong crowdfunding market to form. The availability of crowdfunding as a capital formation option for entrepreneurs and small businesses is a huge opportunity for our economy to create
innovative new products and services.

Our goal is to convene this leadership group and build a united voice in collaborating with the SEC to write balanced and common sense language to regulate this industry. We must work carefully and without delay to launch equity crowdfunding in the U.S. so we can begin to create new jobs and innovation. We appreciate your leadership now more than ever to ensure we can fulfill the promise of this legislation.

We appreciate your efforts on behalf of entrepreneurs nationwide.

Please forward this press release to friends and your network.

Please follow our monthly global events on the Private Company Marketplace by following us at @TheSohoLoft for the most updated news. Mr. Drake can be reached at David@LDJCapital.com should you want to learn more about events the last few weeks in Congress and also what will occur the next few weeks. TSL is scheduling a Crowd Funding cocktail in NY April 18th, a TSL panel in Stockholm with co-founder of Skype April 26th, TSL CC in San Francisco May 10th and Chicago June 7th. Let us know when we can discuss how crowd funding can influence your institution, bank, ngo or public and private company.

Donna Smith

LDJ Capital & The Soho Loft
Communications
Donna Smith
LDJ Capital
http://www.LDJCapital.com – Fund of Fund and family office advisory.

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