Saturday, November 10, 2012
Winning at VEDC Access to Capital 2012 in San Francisco
The Valley Economic Development Center (VEDC) cares enough about small business owners to link them to sources of investment. I liked their San Francisco event so much last year that I had to come back for a second helping. I thoroughly enjoyed attending the VEDC Access to Capital Business Expo 2012 in San Francisco and was lucky enough to be selected as a panelist for one of their "Where's the Money?" expert workshops. I was the only blogger on a panel full of institutional financiers and did my best to show off my genius . . . er, I mean, enlighten the audience about post-modern innovations in raising capital.
The other panelists were pretty cool. They were from banks and other institutions that offered products running the gamut of SBA-backed loans and accounts receivable factoring. My turn to explain myself came after everyone else had pitched their value propositions. I explained crowdfunding in the context of its immediate predecessors, microfinance and P2P lending, and predicted that any crowdfunding portal that could offer a combination of debt, equity, and exotic project finance options would be a very attractive acquisition target for a major broker/dealer someday. I threw in a couple of details about the JOBS Act's definition of an emerging growth company and how startups that want to benefit from its registration exemptions need to use only the handful of portals that have registered with the SEC. I finished off by proposing four best practices that can help a startup maximize its chances for successful fundraising and reduce its chances of incurring lawsuits or criminal penalties. Here they are, and perhaps they'll start some kind of movement toward standardization. The first three practices describe documents a startup should post on its crowdfunding portal, and the fourth is something to execute daily.
1. Business plan. Post your two-page executive summary, mega-slideshow of your business model's execution, and two years worth of projected monthly cash flows on the crowdfunding portal.
2. Prospectus. A good business attorney can help draft an offering memorandum that will comply with the JOBS Act and the rules the SEC should publish sometime early in 2013.
3. Term sheet. Use the free term sheet generators that major law firms have built for free on their websites as part of their offerings to entrepreneurs.
4. Social media campaign. Entrepreneurs need to get savvy about using social media to drive investor traffic to their crowdfunding portals.
I admitted to the audience that the crowdfunding environment is kind of like the Wild West where anything goes right now until the SEC publishes its final rules. The sector reminds me of where e-commerce was in the 1990s when eBay and PayPal were just gaining traction. I still remember rival companies pushing "digital cash" solutions back then that ultimately went nowhere once secure portals figured out how to accommodate traditional cash. That kind of shakeout is coming to crowdfunding, so it pays for both investors and entrepreneurs to be reputable from the start. I got a few laughs when I mentioned that I blogged about crowdfunding last night, so they had a healthy sense of irony about my blatant self-promotion.
The audience members were pretty sharp and had some good questions. One guy asked me if U.S.-based crowdfunding portals were open to investors and companies from outside the U.S.; I admitted I had no idea. That is really the kind of thing the SEC should seriously consider through public comment on its rulemaking process. Internationalizing a U.S. crowdfunding platform would make this country a leader in financial market innovation (and no, hedge fund algorithms don't count as innovation in my reckoning). Another audience member asked about the best time to bring angel investments into a startup. I said words to the effect that investing should be a natural outward progression from one's own capital (savings and couch pillow spare change), to friends and family money, then crowdfunding, then angel investors, and finally VCs. I truly believe crowdfunding can bridge the financing gap between personal sources and the larger world of professional investors.
I also stuck around for the next "Where's the Money?" panel on fundraising. I liked what Youth Business America does with microfinance and what Midland American Capital does with invoice factoring. My recollection of the panel's responses follows. Banks have many credit channels: practice finance, SBA, and equipment finance to name a few. Relationships matter in lending because banks consider their clients' exit strategies. Non-bank lenders often bring technical assistance with business planning, plus outside partners from SBA, SCORE, SBDC, and others. Non-bank financiers can also help a startup become eligible for more stringent bank lending by putting cash on its balance sheet. One audience member at this second panel asked about crowdfunding, and a panelist said it's useful for projects with ROIs that are hard to define (like a music album or art project). He was correct and I didn't speak up to interrupt because it wasn't my panel anymore. I know when someone else deserves to shine.
Lunch at the Hyatt Regency San Francisco was as terrific as I remember from last year, with salad greens, chicken in cream sauce with rice pilaf, and some kind of carrot cake dessert thing. I hung around afterwards to snag some extra biscuits and rolls that others foolishly left behind. Yeah, I'm frugal like that if it spares me the expense of dinner. I'm ultra-cheap and proud of it, woo-hoo!
There were only a small number of hot chicks at this entire forum. I got into a conversation with a really hot gal from Europe who wanted to digitally self-publish research on politics and diplomacy, and I kept thinking about how cool it would be to make out with her right there at the conference. Well, unfortunately business comes first.
The lunch speakers were pretty good. The Wells Fargo lady talked up her bank's support of the nation's "recovery" but I remember hearing the same kind of talk last year and evidence for said recovery is still spotty if you track data from Shadow Government Statistics. She did have some good insights about using critical thinking to challenge our assumptions and get beyond simple choices between positive and negative extreme outcomes. I'll do that the next time I have to choose between a blonde, brunette, or redhead and ask them if they'd all like to date me simultaneously. Yes, I'm serious, I really do think that way.
The next lunch speaker was the regional SBA guy. He had some good advice, like getting whatever business licenses you need early in your startup process or you'll pay twice as much for them later (presumably through opportunity costs of lost business). His charge to the crowd was to max out the use of free resources like SBA and VEDC. I hope the audience appreciates these free goodies, because the federal government's fiscal pressures will put all taxpayer-funded business programs in jeopardy very soon.
The founder of Chasing Lions Cafe told us how his home equity loan financed his first cafe; his home ended up underwater while his business stayed profitable. The keynoter from ZinZin talked about branding because that's what the firm he founded does for a living. I'll summarize his main points. He said succeeding in a down economy tells you that you did something right, while doing it in a good economy means you never know the true cause. Great branding doesn't just happen; it must be debated and advocated as a compelling narrative. He challenged us to ask ourselves the following questions about the core of our brand identity:
1. Who are you / What do you do / Why should anyone care?
2. What's the great promise of your brand?
3. How will your brand change the world?
The ZinZin dude said competing on price and features makes your business a commodity; I'll bet he's been reading Harvard Business Review. He also said a strong name, memorable story, and business actions that back up your story make a great brand. Be bold! Have a disruptive name and message that force people to slow down and pay attention. Make a big bang. End of story.
Okay, mister ZinZin, I'm taking you up on those challenges. Here's how I answer your big three questions for the Alfidi Capital brand.
1. I'm Anthony J. Alfidi, Supreme Super-Genius / I make people angry with my obnoxious blog articles / People who are easily offended should care about how I ridicule the stupid things they do with money.
2. My brand advocates unlimited freedom, radical honesty, and side-splitting humor about finance.
3. Alfidi Capital will change the world by humiliating dishonest financial "professionals."
I didn't hand out any business cards because exchanging contact information with other people isn't part of my self-publishing business model. I did make one serious mistake by writing my name on some contact sheet when a clueless woman asked for a way to reach me. I told her to Google my name but frankly I shouldn't have gone to that much trouble for her because I have no intention of getting in touch with her. Maybe I should have rudely told her to get lost (you know, the whole business actions in support of my brand story thing) but some people are just so clueless they tug at what's left of my heart strings. In the future I'll just spell my name once and people need to be quick enough to write it down for reference and move along. I told quite a few other inquisitive people to look up my name printed in the program and they figured it out, geniuses that they all are. Business professionals don't need my card anyway because I'm pretty visible around San Francisco. I'm branded as an independent blogger and I need to minimize direct human contact to succeed.
There you have it. I plan to attend Access to Capital San Francisco next year as a keynote speaker. I promise I'll make it unforgettable.
Nota bene: None of the companies or institutions mentioned have given me any compensation or consideration for this blog article. My recollection of this conference is provided as a public service.