Crowdfunding for entrepreneurs

1. Crowdfunding for entrepreneurs Harness crowdfunding to power your vision

2. Who we are • CrowdCheck undertakes due diligence on companies seeking crowdfunding, giving entrepreneurs a way to prove they are legitimate, and investors a tool to avoid fraud. • Sara is a securities lawyer with 30 years of experience with the SEC, on the Hill and in private practice around the world helping companies access the capital markets. sara@crowdcheck.biz • Brian is an attorney and entrepreneur with experience in the challenges facing small businesses. brian@crowdcheck.biz

3. Legalese: please read • This slide deck and its accompanying presentation are for general informational purposes and should not be regarded as legal advice. Neither these slides nor the CrowdCheck personnel who authored or presented them are rendering legal or other professional advice or opinions on specific facts or matters, nor does the distribution or presentation of these materials to any person constitute the establishment of an attorney-client relationship.

4. Spoilers • No, you can’t do securities-based crowdfunding yet • Have to wait for the SEC and the FINRAto say “GO” • Don’t tell the public you are going to seek crowdfunding, or are going to consider seeking crowdfunding • May be considered an “offer” • There are still a lot of questions the SEC needs to answer • When in doubt, talk to your lawyer

5. What is crowdfunding? • Large numbers of investors make small investments in small business or start-up • Expands family and friends investment stage • Traditional progression of early-stage funding • Early-stage funding today • How different from non-profit crowdfunding • Different laws • Different motivations • Congressional concerns re investor protection

6. Who can raise fundsthroughcrowdfunding? • Must be organized in the US • Not already registered with SEC • Never filed an S-1 • Not an investment company • What an investment company is: • Generally - A Company that invests in other companies • CHECK WITH YOUR ATTORNEY

7. How much can you raise? • $1 million • LESS other securities offered (eg, in other angel capital raises) unless SEC defines creatively • 12-month rolling period • Example: Company sells $500,000 shares in January, $400,000 in September. In December can only sell $100,000. Next January can sell $500,000 more.

8. Who can invest? • Any investor; must pass test on funding portal • Amount of investment dependent on income/net worth • Income/net worth under $100,000: $2,000 or 5% of income or net worth • Income/net worth over $100,000: 10% of income or net worth, up to $100,000 • Limits might exclude institutional “investors” • Limit based on allcrowdfundinginvestments

9. Advantages of crowdfunding • Seed money to get company to next stage • Patient money • Debt/equity/preferred shares • Don’t need to have connections or be located in tech hubs or in “hot” industries

10. Considerations • Disclosure requirements, including financial • Ongoing obligations • Dilution • Valuation • Impact on VC funding • Secondary market • Managing large numbers of shareholders • Costs • Liabilities

11. How to do it • Choosing a portal and amount to seek • Post on a crowdfundingportal • Disclosure • Certified/reviewed/audited financials etc. • Process

12. How to do it (2)

13. Now that you’ve done it • Ongoing disclosure • Impact on future plans • Permitted resales

14. When can I do it? • Current state of play • Congress • SEC rules • Rules re process • Rules re portals • Other parties involved; SRO (FINRA?) • What can you do right now?

15. Who can help me? • Portals • Lawyers and other professionals • Incubators and SBA assistance • Trade associations; Chambers of Commerce • Other sources of information

16. Any questions? • www.crowdcheck.biz • sara@crowdcheck.biz • brian@crowdcheck.biz • Remember this isn’t legal advice!