Crowdfunding A New Way of Fueling Businesses

1. March 28, 2013 • Personal • East Coast Refugee; Moved to Denver from NYC in January 2012. Skier, backpacker, music fan, connoisseur of craft beer and nice whiskey. Bought 3 bikes since moving to Colorado. • Professional • Co-founder Funding Launchpad • Practiced corporate/transactional/securities law at large New York law firms for five years Crowdfunding A New Way of Fueling Businesses Shane Fleenor Chief Legal Officer / Founder shane@fundinglaunchpad.com 857.998.1830

2. Is Crowdfunding New? 1

3. Types of Crowdfunding Donation 1

4. Types of Crowdfunding Reward 1

5. Types of Kickstarter Projects Image Credit: Kickstarter blog 4

6. Crowdfunding Benefits 5

7. Types of Crowdfunding Micro-Finance 1

8. Types of Crowdfunding Investment 1

9. 1933 and 1934 8

10. The Spark Image Credit: Gplus.com 9

11. The Legal Issue What Was the Problem with the PBR Deal? In general, a company (a.k.a. an “issuer”) can’t sell securities (e.g. stock, debt) to the public, unless that company has either: registeredits securities offering with the SEC (an expensive, time consuming process – think IPO), or Has an exemption from registration that it can rely on. The PBR guys were selling unregistered securities in Buy a Beer Company LLC without an exemption! 10

12. Types of Crowdfunding Investment 1

13. HR3606 – JOBS Act Title III • $1M per 12 month period • Per-investor limit depends on income/net worth-ranges from $2000 to $100k-across all deals annually! • Must use an intermediary • No registration needed • Can also raise via other means 12

14. HR3606 Title III • Stock or debt-based offerings • Robust disclosures required • Investor education requirements • Background check on issuers • Must hit target for funds to transfer • Requires audited financials if >$500k; or reviewed financials if >$100k • Rules will come out…??? 13

15. HR3606 Title II • Lifts General Solicitation Ban on Reg D Rule 506 Offerings* “Accredited Crowdfunding” • Unlimited Raise/Investment Amount • ALL Investors Must be Accredited (self-cert no longer adequate) • Same disclosure as for present private offerings (PPM, Term Sheet) • Final rules expected late spring/early summer 2013 14

16. Clarification/Shameless Plug • As an aside, we are diving into the Reg D 506 business • Will soon announce partnership with a broker-dealer; founders will become FINRA-registered reps of the BD • “Grofolio” will be the name of this platform; Funding Launchpad reserved for perks crowdfunding • This rebrand is important -- FINRA is very concerned about investor confusion that could result from platforms that combine perks and investment crowdfunding • Shows just how highly regulated this industry will be 15

17. When Can I Crowdfund? • Donation or Rewards-based offering – Today • “Accredited Crowdfunding” – Next few months • Title III Investment Crowdfunding – Spring 2014? • Crowdfunding via Registered Offering – Today* • $1M+ total per 12-month period (varies by type) • General solicitation OK • Non-accredited investors OK • * But don’t get too excited… 16

18. Types of DPOs • SCOR • 45 states; multi-state review • $1m per 12 months • Designed for small businesses • Other Intrastate Offerings • Nearly all states; generally registered, a few are exemptions • Limits vary; $1m is common • Reg A • Federal; $5m limit (soon $50m) • S-1 (“Going public” but not using an underwriter) 17

19. Crowdfunding a SCOR 18 Disclaimer: Funding Launchpad is not offering to sell these securities

20. Crowdfunding a SCOR 19 Disclaimer: Funding Launchpad is not offering to sell these securities

21. Fraud Concern? 20

22. Costs and Concerns • Time & energy - raising money is serious business! • Must put a lot of information out in public • Takes money to make money - costs associated with any model of raising money • Messy cap table for follow-on investments • Dealing with hundreds of investors 21

23. Crowdfunding Benefits • Great brand exposure (especially now!) • Market validation • Turn customers into evangelists for your brand • Feedback from potential investors • Find teammates, partners, clients… • Ongoing “smart money” support from investors 22

24. So Where Does That Leave Us? • Unfortunately, raising money will continue to be a time-consuming task; crowdfunding isn’t magic. • But entrepreneurs have been handed an exciting new set of fundraising tools, and ordinary investors will soon be free to participate in a broader slice of the capital markets than ever before. • Remember: its still a securities offering, subject to heavy regulation and maddenly complex laws. Get a lawyer. • The new laws aren’t ideal; the rules won’t be either. But it’s a step in the right direction -- its progress. “Revolution” is a lofty term, but the fact is these are some of the biggest changes to the fundraising landscape since the Great Depression. • Its an exciting time to be an emerging business! 23

25. March 28, 2013 Crowdfunding A New Way of Fueling Businesses Thanks! Questions? Comments? Shane Fleenor Chief Legal Officer / Founder shane@fundinglaunchpad.com 857.998.1830