Lisa Canning, Crowd Fund Capital Advisors
Lisa Canning is Crowdfund Capital Advisors Education Czar. She is a recognized speaker at home and abroad and when she is not helping folk to raise capital through crowd funding, she plays the clarinet… be sure to listen through to the end of today’s episode for a delightful sample of her musical expertise.
LEARN HOW THE JOBS ACT CHANGED REAL ESTATE FINANCE
and how you can raise money and invest in crowd funded deals.
Crowd Fund Capital Advisors
Crowdfund Capital Advisors was born with two entrepreneurs, Sherwood Neiss and Jason Best, who, after the market crashed, felt that businesses were really having a tough time raising capital and, having gone through trying to find capital themselves for their own different entities, realized that there had to be a better way to capitalize businesses. Once the JOBS Act was passed, and while it was wending its way through SEC processes, the principals visited and advised entities in over 41 countries on how to develop meaningful legislation and ecosystems that support the financial growth of their own entrepreneurs.
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Crowdfunding is actually a way to do something that that has been done forever: It is nothing more than thinking about passing the church hat except that it comes in many forms. It can be through the form of a donation like passing the church hat, it can come in the form of a rewards based prize, or, as in the case of real estate, is can be that you receive a share of something in return for the money that you give. Until the JOBS Act, unaccredited investors, those that did not have high net worth, were not able to access the kinds of deals that typically high net worth individuals were able to. It opened up a pathway for both equity and debt investing, that was not available to the common person.
But what crowdfunding really needs is education because so many people out there think that it is as simple as putting your deal up online and the money will start pouring in, but it is far more complicated and involved than that. Growth of the industry has been steady, which is good because steady healthy growth is a recipe for success. Speeding bullets are a recipe for fraud.
The Funding Portals
To be able to raise Reg CF (Regulation Crowd Funding) money, you must do it through an SEC registered funding portal. The SEC wants to make sure that there is complete transparency and that everything is disclosed to the investing public. It does not take that much time to get to market, depending on which crowdfunding methodology you use, but timing is not the key issue, marketing is, and you have to have probably 30 or 40 percent of your proposed raise earmarked before hitting the market. If you do not know precisely where that part of your capital is going to come from before launching, your campaign is likely going to flop. Even then, you will be raising a lot of money, in smaller amounts from more people than you are used to. To be able to do that and to have people you do not know or who are once removed from who you do know requires a lot more effort before you ever get started.
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Establishing a Relationship With Investors is Key
Lisa’s role is to help companies understand these factors and she has, unfortunately, seen very successful real estate brokers and agents, investors and borrowers, go out onto sites, plonk down their hard-earned money, spend fifteen or twenty thousand dollars, who have done real estate deals all day long and screw it all up because they do not understand some basic principles. Going to the same old people that they have previously gone to may or may not work because they may not be interested in sharing the deal with a variety of unaccredited and unknown investors. Think of it this way: If you have a close relationship with somebody that you have in the past raised money from for a real estate deal and then suddenly you try and put the next deal up on line you are going to be distancing yourself from them in some way. Crowdfunding a deal means you are approaching a different market that requires a different approach.
Not only do prior investors need to be acclimatized to the new methodology, but the entire process needs to start way earlier before you ever worry about the portal. This means developing a sophisticated social media presence, promoting your project by through podcasts or live Facebook video, through networking. In short, it involves ensuring that you are out in front of the right people long before you ever need the money in advance, creating a relationship with an audience of people who don't know you and who you don't know. And from who you are about to ask for money.
From the investor perspective, you must do your homework on a deal before investing. You have to thoroughly read the prospectuses, thoroughly read the offering, and have all of your questions answered before signing the check. Investing is a risk, and you can lose all of your money.
Confluence of Three Industries
Crowd funding real estate platforms have to be experts in three industries: They have to function within a strictly regulated framework; they have to be expert in tech and online marketing (not trivial), and, last but not least, they have to be real estate experts. That said, crowdfunding is a modern solution to an old technique that increasingly our world has forgotten which is sharing your knowledge and investing in our community and partnering with people who you know and with their friends.
Regulation CF – Crowd Fund
To issue an offering under Regulation CF, a developer has to work through a portal registered with the SEC, and can decided whether or not they will accept the developer’s deal [Subscribe to the podcast at one of the links below so that you do not miss my guest Eve Picker, Founder and CEO. Eve owns the SmallChange portal, which is of one of the only registered portals doing Reg CF for real estate deals]. Portals charge various levels of fees, all regulated. A lot of times people think that a portal will bring them the investors which they may not. So far, Lisa says, the data has proven that investors typically will invest in a deal or two in a space or a project or that they know really well, and then they will not invest again. Consequently, assuming that the portal will bring you investors, while true, is not the beginning and end of the process of raising capital. You still have to do your own marketing.
Lisa wears another hat. Over the last few years she has been very focused on trying to create jobs and finds that the music industry needs more of them too. Consequently, she has been developing musicians into consultants to sell clarinets – the sales model is very flat with Amazon. Her website is https://www.lisasclarinetshop.com/ and she is working with a few different manufacturers to sell direct manufacture to consumer really high-quality instruments. Check it out and I hope you enjoy the sounds of Lisa playing at the end of today’s episode.