6 Reasons for Today’s Startup Boom

Record-breaking numbers of entrepreneurs around the world are starting their own businesses. Millions of people are forgoing the ‘job’ mentality and embracing their entrepreneurial spirit. There are little ecosystems of startup communities in nearly every major city in every industrialized country. The United States boasts almost half the global startups. Why is this happening?

1. U.S. vs. Global

The stage of economic development plays a role in volume, type and motivation for entrepreneurial startups. In the U.S., according to 2014 data from the Global Entrepreneurship Monitor, at least 13 percent of adults are starting and operating their own businesses. Where there is room for growth in the U.S. is in leveraging the global economy. GEM survey responses indicate fewer than 15 percent of U.S. entrepreneurs have a significant international customer base.

2. Opportunity Over Necessity

In the post 2008-recession, entrepreneurial motivation was reported as “necessity” – more people were starting businesses because they’d lost a job. Today, about 80 percent say they are motivated by opportunity in the economy.

3. Technology = Low Entry Cost

Technology is unquestionably the largest enabler of startup entry. The basic foundation for digital products and services are ubiquitous, cheap and flexible. The speed, universality and wireless nature of the Internet, the ease of cloud computing and access to tiny bits of code means an outsourcing and inexpensive smorgasbord for startups.

4. Social Media

An offshoot of technology, social media provides an interactive marketing and promotion platform at a fraction of the cost growing businesses used to have to spend on traditional advertising. A product invention or new service can be visible to the world with a small investment in a website and a few clicks of social promotion.

5. High Valuations

Valuations of a record number of privately held startups have hit $1 billion or more. As of June 2015, 66 of the 98 firms with valuations of $1 billion or more were American. There is no shortage of role models showing that it is indeed possible to become wealthy as an entrepreneur.

6. Demographics

Immigrants and boomers are both more likely to start businesses. According to the 2014 Kauffman Index of Startup Activity, immigrants to the U.S. started more than 28 percent of new businesses even though they represent just 13 percent of the population. And baby boomers between ages of 55 and 64 are starting more businesses than their Generation Y counterparts.

Under U.S. law, companies conducting capital raises under the new Rule 506(c) rules must verify investors to ensure they are accredited. Confidently bring investors on board with the help of the simple, reliable and confidential process offered through VerifyInvestor.com.

5 Reasons to Avoid Disruptive Technology in Your Startup

Disruptive technology is far from the only path to success. In fact, many believe that imitation is under-valued. A published report in the Harvard Business Review claims imitation is actually “an intelligent search for cause and effect.”  Author Oded Shenkar’s research led him to conclude that imitation, as well as being a difficult task requiring imagination and intelligence, is in fact a “primary source of progress”.

Following Shenkar’s line of thinking, here are 5 key reasons to avoid disruptive technology in your startup.

1. It’s a Small World
Globalization has made the world a tiny one, at least when it comes to markets. Startups don’t often have the money (or time) to get a foothold in all the relevant markets at the same time.  Look for great ideas in other parts of the world that are worth copying, find a way to improve upon them, and then be the first to deliver in your home market.

2. Imitation Drives Progress Too
History is littered with examples of successful businesses that imitated first and innovated second. McDonald’s didn’t invent fast food. Wal-Mart didn’t invent the high-volume, low-cost business model. It wasn’t Visa, MasterCard or American Express that invented the plastic card. To quote Shenkar, “Today’s lions are the descendants of copycats.”

3. Save on R & D
Research and development costs for inventors of a new technology are at least 30 percent higher than they are for ‘imitators’ looking for ways to improve. But don’t confuse this with imitation being easy: far from it. Scientists now acknowledge imitation is a demanding, complex process that takes advanced cognitive ability and high intelligence.

4. Learn From Early Adopters
Imitation based on the innovation of others has several advantages. Market research can be conducted on real customers in a real market. What other startups have had to do as they encounter obstacles, make mistakes, and pivot can be invaluable lessons for you.

5. Attract Investors
Not all investors are holding out until they find that next-big-thing. Many instead recognize the value in strategic innovation that is based on imitation of a proven concept. Look at banks, for example: they are much more likely to provide loans to those buying a franchise than those starting something completely untested, however promising it may be.

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Tips & Tricks on Safely Getting Verified as an Accredited Investor

Video Transcript

Being asked to prove that you€™re an accredited investor?  Here are some tips and tricks on safely getting verified as an accredited investor.

Insist on a safe verification process conducted by a reliable third party you trust to protect you and your information.

Verify the right investor.  If you are investing with a spouse, both of you need to be verified.  If you are investing and taking title through a trust or company, then that entity needs to get verified.

There may be multiple ways to get verified. Choose the method that is easiest for you which requires the least amount of disclosure.

Note who the actual owner of the assets is.  The evidence provided should match the name of the investor being verified.

Don€™t provide any more information than necessary.  Provide relevant sections rather than full documents and only show the assets you need to.  Redact out sensitive information such as account numbers, addresses, and portfolio positions.

Do NOT divulge your social security number or allow them to pull your tax transcripts and credit report.  Instead, take the time to securely obtain them yourself and provide your verifier with redacted versions.

You might be required to provide a credit report.  Because you only get one free credit report per year from each of the three agencies, consider getting one report each time you get verified rather than using up all three free reports at once.

For real estate, private company stock, or alternative assets, use 3rd party objective valuations like appraisals, real estate broker estimates, or CPA valuations.

If you€™re a foreign investor outside the U.S., the verification standard is still the same.  Provide U.S. documents whenever possible. Otherwise, provide your country€™s equivalent.  Translate relevant portions into English.  Remember, verification thresholds are in U.S. dollars.

Having to verify that you are an accredited investor is frustrating, but we hope that these tips and tricks will help you get verified more safely and easily.

Happy investing!

Investment Tips for the Tech Industry

The tech industry has had its share of investment darlings – Google, Instagram, or Tumblr for example – that net big returns for investors. But those big wins aren’t the norm. More often it’s the case that investors in tech startups don’t ever see a return. Here are a few tips to help make sure your portfolio is balanced, minimizing loss risk and maximizing the potential for big returns.

1. Stick to What You Know
Successful angel investors will be the first to tell you they’re no different from anyone else. They read the same financials; have access to the same data. What may be different is that they tend to stick to what they know. If the majority of their business experience is in the telecom industry, they will tend to invest in telecom startups. The further afield from your area of expertise, the greater the risk of diminished returns.

2. Portfolio Approach
Instead of putting all, or even half, of your investment eggs in one basket, consider spreading your capital and investing in at least 15 tech startups. Regardless of how persuasive the pitch is, think about investing the same amount in each startup. This way you are limiting your exposure, increasing your chances of having an investment winner in your portfolio, and you’re better able to weather the likely potential that several of your investments will not pay a return.

3. Patience
In addition to the risky nature of tech startups, the maturity timeframe is long, averaging about eight years. Be ready to wait, and watch, and don’t expect a quick result.  It can get pretty discouraging at times.  Many companies face several crisis events before they make it big.  Hang in there.

4. The Ten Percent Rule
Some believe that the reporting from the tech sector is slanted to the positive side of reality, often giving a false impression of startup success. In addition to very carefully assessing the risks in each potential investment opportunity, limit your tech startup investment to no more than 10 percent of your available investment capital. And, be prepared to lose it.

The stories like Google’s acquisition of YouTube or Facebook’s purchase of Instagram, are examples of just how big and successful it is possible for a tech startup to get. For every Twitter-type success story, there are hundreds and hundreds of broken hearts and empty bank accounts. Take just a few steps back, and a balanced, conservative approach, to make sure yours isn’t one of them.

Missing out on some great fun and possible good returns.  Join the party by getting verified as an accredited investor and invest in some deals.

SEC Advised to Modernize Rule 147

Intra-state crowdfunding rules may be about to get an overhaul. Intra-state crowdfunding is crowdfunding where all activities – promotion, offer, and sale – happen within a single state.

The increasing number of states enacting their own state-based crowdfunding provisions and the changing nature of business and capital raising, have prompted the Securities and Exchange Commission’s Advisory Committee on Small and Emerging Companies to recommend that the SEC modernize Rule 147.

What is Rule 147
Rule 147 finds its orgins with Section 3(a)(11) of the Securities Act of 1933.  Section 3(a)(11) is often referred to as the intrastate exemption and is one of the tools that can be used by small companies raising relatively small amounts of money that would like to avoid having the pay the often-hefty fees related to registering with the Securities and Exchange Commission.  Rule 147 is essentially a safe harbor provided by the SEC’s in order to give more certainty as to the parameters of Section 3(a)(11).

Who Qualifies
Companies must meet the following criteria and some others in order to qualify for an exemption under Rule 147:

• The securities offering is in the same state in which the company is incorporated and the principal office is located in that state
• At least 80 percent of the company’s revenue must come from business activity in the state in which it is incorporated, at least 80% of the compay’s assets must be in that state, and at least 80% of the capital raised must be used in that state
• Securities are only sold to residents of the same state  

The Catch
The requirement that both the offering and the sale must be restricted to intra-state is the problem. Crowdfunding anticipates the use of the internet, which makes it difficult for a company to truly crowdfund while taking advantage of the Rule 147 exemption.  At the time Rule 147 was created, the implications of the Internet weren’t considered.

The Fix
The Advisory Committee recommended that the SEC modernize Rule 147. Although there was not specific guidance as to what exactly the SEC should modernize, the committee addressed a few concepts.  For example, one idea was to revise Rule 147 to remove the current violation for “offering” securities outside of the company’s home state, while retaining the requirement that the “sale” of said securities remain intra-state.

Whether the SEC itself accepts the Advisory Committee’s recommendation, and if so, what exactly the modernization will entail, remains to be seen.

Crowdfunding through Title II of the JOBS Act is an easy alternative but federal laws require verification of accredited investor status. Verification is fast, secure, and easy with VerifyInvestor.com.

6 Major Startup IP Mistakes

Intellectual property, or IP, is commonly misunderstood and underestimated. Anything that is a “creation of the mind” might qualify as IP. See if you can find yourself in these 5 major IP mistakes many startups make.

1. Under-estimating the Value of Knowledge to Launch the Startup

Literature, music, and scientific discovery are examples of IP, as are designs, symbols, words and phrases, industrial design, and trade secrets. So if you’ve got a great, unique idea that’s worth starting a new business venture over, it’s almost certain you’ve got IP that is worth protecting.

2. Overestimating the Value of IP

IP is well, just IP. Unless someone applies the IP to real life scenarios, the true value of the IP is never realized. Ideas are cheap; but execution is not. To achieve success, figure out a way to leverage your IP and turn it into a real company. When you show the ability to capitalize on your IP, that’s when you’ll be worth a lot.

3. Failing to pursue provisional patents early enough

If you’ve chosen a name, designed a logo, built a website and prepared product packaging, you may already be too late. You need to file patents, register and secure trademarks (yes, even to your startup’s name) before you are too visible to the public. Patents, in particular, must be filed before your product launch.

4. Not asking for help, or asking the wrong people

It’s understandable to want to give in to the temptation to save money by handling protection of your IP on your own. Resist. That is short-term thinking that could cost you everything in the long run. At the very least, consult with a lawyer specializing in IP so you get a thorough understanding of your startup’s IP landscape.

5. Not considering how geographic locations can impact IP

Patents and trademarks filed in the U.S. will only protect you in the U.S. If you have any international exposure at all, consider whether there are other global jurisdictions in which it will also make sense for you to file.

6. Believing handshakes will protect your IP

A wink and a nod are not enough. Rely on formal confidentiality agreements to protect your trade secrets. And don’t underestimate the importance of having everyone sign before you share any information. Yes, even the software coder you’re hiring overseas.

Understanding that your IP is a valuable asset is a great first step. It’s never too early to start the work of identifying exactly what IP you have. Then, with professional support, developing a strategy on its protection may make the difference between startup and star. 

A solid IP strategy can add value to your startup, especially in the eyes of potential investors. For more information on how to verify that your investors are accredited investors, go to VerifyInvestor.com.

The 10 Startup Tips No One Tells You

Getting a startup off the ground is an all-consuming affair. With all the advice out there around building your business plan, defining your market, and raising money, there are a few tips you don’t hear often enough. Here is our top ten list.

1. It’s Way Harder than You Think
It’s the reason only 1 in 4 startups succeed. Success is not born purely of doing everything right, at the right time.

2. Ideas ≠Easy Execution
A great idea is just that: an idea. The most creative and original idea in the world isn’t worth anything if it can’t be implemented relatively painlessly.

3. More is Not Always Better
There’s value in focusing on a few products and features while you establish your startup’s viability and market. It’s tempting, particularly in the tech world, to get dazzled by a dizzying array of potential features that are oh-so-cool. But there is a big risk they will dilute your real value.

4. Design Matters
Investing in the design elements of your startup is never a waste. Your logo, brand guide, web presence and the look of your product and features are all critically important. Functionality isn’t enough. Period.

5. Teamwork Trumps Talent, Every Time
Your brilliant team members with their long impressive CVs and huge contact lists aren’t going to save you if your team can’t get along. The ability to work together, in harmony, is far more important than brilliance.

6. Cultivate Empathy, Torpedo Ego
Okay, it’s impossible to completely get rid of ego. But not keeping it in check can be fatal to your startup. To help ward off an ego torpedo, focus instead on cultivating empathy.  Concentrate hard on listening. Listen to your customers, potential customers, and your competitors, and be ready to let them challenge what your ego tells you is right.

7. Track Organic Traction Above All Else
Organic growth is the measure of whether there really is a demand for your product or service. Spend on marketing to build your brand exposure, of course, but at a certain point, there should be a level of excitement and natural, organic demand growth.

8. The Power of the Pitch
You won’t need a presentation in the same way as you used to, but you still need to have a good “pitch” that you can pull out when you need it. The quality, including design and user experience, of your pitch will tell potential investors that you know what you’re doing. They should be able to visualize your startup as a successful entity with your pitch alone.

9. Prepare for a Pivot
You set off planning to deliver product “A”. But what happens when demand for product “A” never takes off, levels off, or tanks much earlier than you anticipated.  Instead of going down with the original idea, be prepared to modify your business.  A pivot doesn’t have to be a complete change in your business, so you won’t necessarily lose all the hard work you put into developing product “A”.  Don’t be afraid to pivot if you have to; many great companies are doing things that are different than what they originally set out to do.

10. Opportunity’s Knock is Often Unexpected
Getting a startup off the ground takes everything you’ve got – all of your focus, energy, creativity and talent. Still, you need to make sure you’ve got the intellectual room to recognize an opportunity that might come from left field.  The Hall of Business Fame (if there was one) is populated with entrepreneurs who took advantage of an opportunity that presented itself when they least expected it. Just be careful not to spread yourself too thin chasing every opportunity.

When you’re ready to start your search for verified accredited investors, we can help. Learn more about us at VerifyInvestor.com.

Trends Affecting Real Estate and Other Investments in 2015

According to PWC’s 2015 U.S. CEO Survey, CEO’s believe more opportunities exist today for their companies than was the case three short years ago.  The survey also suggests that CEOs outside the U.S. are looking to the U.S. more than any other market for their growth in 2015.

What are those CEOs – domestic and international – seeing? Let’s take a look at some of the trends that we expect to shape the 2015 investment year.

18-Hour Cities

Urbanization is a trend affecting everything from housing (condos, anyone?) to public infrastructure. If you’re 40 or over you likely remember that cities used to be places that buzzed with life from 9 to 5 and then quieted down as all the workers slipped back to their bedroom communities for dinner with the family. Today, more of those workers live within walking distance of their workplaces, and voila, we’re seeing the transformation of downtown cores with investments in retail, dining, housing and urban cores that suddenly boast high quality of life well past 5pm.

Mover Over Boomers, Here Come the Millennial

Boomers will still have a significant impact on investments and real estate development for about twenty years, but there’s a new cohort about to take over the lead demographic role in economic definition. As baby boomers die off, the millennial cohort is poised to become the largest living demographic cohort. This is the group, aged 18 to 34 in 2015, which will shape the economy the most in the next 20 – 40 years. Less affluent than their boomer parents, millennial will rent longer, postpone homeownership, and thus affect the real estate and development industries.

Disruptive Technology

Technological disruptions - Uber, crowdfunding and e-commerce are all examples – are increasingly viewed as an “adaptation challenge” and much less an “event” to be feared. New business environments and tools create and respond to new user demand as technology continues to push for changes in, among other things, real estate locations and usage of space.

Event Risk the New Normal

Geopolitical risks, natural disasters and global unrest are on the minds of most domestic investors, and as such, according to PwC, international investors (those international CEOs we referenced above) will likely be key to 2015 investment volume.

Housing Back to “Supply and Demand” Fundamentals
It appears the bubble and collapse are truly in the rearview mirror of the residential real estate industry, and consumer confidence in this sector is on the rise.

Expand your investment portfolio with confidence as an accredited investor. At VerifyInvestor.com, we help you self-verify confidentially, quickly, and cost-effectively.

Crowdfunding Sites for Startups

If you haven't yet tapped into the crowdfunding craze to help you raise money for your startup, it might be time. There are a few basics to understand before you decide which crowdfunding platform is the best for you to look for investors.

Equity and Reward

Rewards-based crowdfunding is the longest-running model, and involves the advance purchase of products and experiences or donations. In this model, funders aren't really “investors”, as they do not become “shareholders” in the traditional sense. Instead, they receive rewards for their advance purchase or donation. Equity crowdfunding is newer, enabled by Title II of the JOBS Act (and Title III, but that isn't yet effective), which now permits entrepreneurs to advertise publicly about their investment opportunity and investors to become shareholders and buy in online. The type of project or business idea that you have will dictate which type of crowdfunding campaign you launch, but here are some crowdfunding sites you need to know.

Kickstarter

By far one of the most well-known rewards-based crowdfunding sites, Kickstarter has been around since 2009 and has helped project owners raise more than $1 billion.

Indiegogo

Indiegogo is another rewards-based site but has a higher international profile than Kickstarter, and they are open to working with almost any type of project.

SeedInvest

A premier crowdfunding site focusing primarily on startups, SeedInvest is an investment, not a rewards based, crowdfunding platform. It’s not easy to get on. All startup investment opportunities are vetted by their investment team and must adhere to strict requirements -- only 2% of applying companies are accepted and made available for investment. What does that mean? It’s annoying to go through their process, but once you’re through, investors know that you’ve been pre-vetted.

Crowdfunder

Don’t want to go through extensive due diligence before listing your offering? Try one of the portals that believes that everyone should have an opportunity to list their deal. Crowdfunder is another investment crowdfunding platform and arguably boasts one of the fastest growing networks of investors. It has helped more than 22,000 companies raise more than $197 million.

EarlyShares

EarlyShares focuses on equity funding for small businesses in the U.S. “Rigorous selection criteria” are used to carefully review every investment opportunity and assess its return potential and viability. They don't accept just anyone – only 5 per cent of those applying are accepted on EarlyShares.

Fundable

Offering both rewards-based and equity-based crowdfunding campaigns for small businesses, Fundable also provides a series of guides to assist entrepreneurs who are starting and growing their companies.

EquityNet

Launched in 2005, EquityNet has been used by thousands of investors, incubators, entrepreneurs, and even government entities to raise money for privately-held businesses. Planning is a big focus at EquityNet, with tools that help entrepreneurs plan their campaigns and investors plan their opportunity assessment.

Crowdfunding, where you're generally solicit investors, requires businesses to verify that their investors are accredited investors. There's no better way to do this than VerifyInvestor.com, where we make it easy to verify accredited investor status.

Regulation A+: Investment Choices ↑, or Investor Protection ↓?

The Securities and Exchange Commission (SEC) anticipates stronger investor protections and more investor choice will result from its adoption of final rules for an updated and expanded Regulation A, as required by Title IV of the Jumpstart Our Business Startups (JOBS) Act.

$50 Million in 12-month Period
Smaller companies will soon be able to publicly sell and offer up to $50 million in securities in a 12-month timeframe, subject to disclosure, eligibility, and reporting requirements of course. The SEC believes this is a “workable path” to easing the process of raising capital that smaller companies may welcome, while still protecting investors.

State Regulators Unhappy
State securities regulators, and NASAA, the association that represents them, claim the rule strips investors of the important protections afforded by state securities regulators under so-called “Blue Sky Laws.” Their criticism springs from the new rule's “pre-emption” provision, which allows offerings to bypass state securities law qualification and review by state regulators. The SEC attempted to address this concern by limiting to pre-emption to “Tier 2” offerings as described below.

Two Tiers of Offerings
Regulation A+, as the new rules are often called, provides for two tiers of offerings:

• Tier 1: securities offerings up to $20 million in a 12-month timeframe, with not more than $6 million worth of offers from affiliates of the issuer that are selling security-holders.
• Tier 2: securities offerings up to $50 million in a 12-month timeframe, with not more than $15 million worth of offers from affiliates of the issuer that are selling security-holders.

Basic requirements for disclosure and issuer eligibility, as exist under the current provisions of Regulation A, apply to both tiers. However, Tier 2 offerings must include audited financial statements, and companies making Tier 2 offerings will have to file semiannual and annual reports with the SEC after the offering. For either tier the company must file an offering circular with the SEC for review and qualification, and companies proceeding under either tier may submit their draft offering circulars for non-public review by SEC staff before filing. Companies may still use solicitation materials after they've filed their electronic offering statement.

Pre-emption of state securities laws is available only for Tier 2 offerings. Companies offering $20 million or less in securities that seek to bypass state Blue Sky Laws may elect to make a Tier 2 offering.

As under the original regulation, an offering under Regulation A+ is considered a “public offering,” which means that securities purchased by non-affiliates will be freely tradable.

A Little Background on Regulation A
When a company sells or offers securities to potential investors, the Securities Act of 1933 requires the offer and sale be registered, or exempted from such registration. Regulation A has, since about 1936, been an exemption allowing up to $5 million in unregistered public offerings in any 12-month period.

While considered an exemption from registration, Regulation A has always had a “qualification” procedure involving submission to the SEC of a prescribed form of offering document, which is very much like the registration process. For that reason it has been thought of as “short form registration.” Because of those requirements as well as the low dollar ceiling and need to conform with state securities laws, Regulation A offerings have been quite rare in recent decades. Exemptions available for private offerings under the Securities Act have had much fewer regulatory requirements.

By greatly increasing the size of offerings permitted, allowing a bypass of state regulations and keeping regulatory requirements less onerous than full registration, the SEC staff believes that the adoption of Regulation A+ is an important step on the road to making it easier for smaller companies to raise capital.

VerifyInvestor.com offers simple, confidential and reliable processes that protect investors' confidential information while confirming them as accredited investors for companies raising private placement capital under Rule 506(c). Visit Verifyinvestor.com for more information.