The Haiku of Finance for 02/23/16

Phony crowdfunder
"Angel" faking his background
Dumb founders get fooled

The Haiku of Finance for 10/30/15

Main Street can crowdfund
Expect big rush to startups
Ride a unicorn

The Limerick of Finance for 10/26/14

Crowdfund energy going green
Renewable cash on the scene
Investors make waves
Clean tech getting raves
Returns still revert to some mean

The Haiku of Finance for 05/10/14

Dumb people funding
Portal rules prevent mistakes
Amateurs go nuts

Amateur Investors May Go Nuts With Crowdfunding

Crowdfunding is in full bloom.  Portals are springing up all over the gall-dang place.  Startups are drafting pitch decks and sticking them willy-nilly on these portals with nary a thought about the audience that can now reach them.  Here's how the average amateur investor can get in trouble.

One guru at a tech conference last year openly wondered why amateur real estate investors are allowed to make poor home investing decisions but have been prohibited from seeking risk in startup investments.  I won't name this dude but I think of his diatribe more often now that crowdfunding portals are filling my inbox with startup pitches.  The difference between buying a house and buying into a startup has usually been about the due diligence banks put into a home loan application.  Home buyers must prove that their income, net worth, and credit history are sufficient to meet the bank's loan risk criteria.  Startup investors in a massively decentralized investing landscape never had to prove any of those things prior to the crowdfunding revolution.

Laws and SEC regulations growing around crowdfunding are bringing further specificity to crowdfunding investors' eligibility requirements.  The regulatory climate needs to be tight before large commercial banks start buying crowdfunding portals to expand their retail investment offerings.  Someone's grandparent is bound to log into their bank account someday and see a tab for "crowdfunding." Clicking on that tab and viewing a bunch of slide decks promising 30x returns may look too good to pass up for someone who doesn't know that most startups fail.  Your grandma and grandpa are used to watching their savings grow.  They're going to blow a whole lot of dough on failed startups if the finance sector doesn't get the controls in place now.

Amateur investors can be pretty dumb sometimes.  Creditworthiness matters in real estate and competence should matter in startup investing.  Crowdfunding can hurt a lot of people who won't know any better.  Regulations requiring proof of assets protect investors from their own tendency to overestimate their competence.  

Top Challenges Facing Crowdfunding In 2014

Crowdfunding is here to stay.  We can thank a nimble small business lobby and some hardworking people in Congress and the SEC for getting the ball rolling.  Okay, maybe more private groups than just the small business lobby work hard, because it sure takes a long time for the policy framework to accommodate reality.  Here's my rundown of where policy needs more work right now.

The SEC must finalize Reg A+.  This proposed regulation allows a hybrid public/private securities offering beneath a specified cap.  I think this helps get around the difficulties small companies will face if they present pitches at public events.  Offering the securities under Reg A+ will alleviate some of the heartburn investors like me feel at pitchfests when a startup shows ignorance of offering circulars and blue sky requirements.

Reduce market barriers to SPOs.  I'm painting with a broad brush here because there isn't just one fix.  OECD Corporate Governance Working Paper No. 10 addresses the decline in IPOs on US exchanges.  Venture-backed startups with large addressable markets have no problem going IPO once they've crossed the chasm to market adoption.  They know there will be a large demand for aftermarket trading.  There is little such aftermarket for those small companies that go IPO under the gradations of the JOBS Act and its supporting regulations like Reg A+.  I do not agree with some analysts who think the decimalization of tick size is deterring IPOs.  I like decimalization because it makes prices less sticky in the market and allows for more accurate price discovery.  My preferred solution is to allow companies that go IPO to continue to issue secondary shares under the JOBS Act.  I see resource companies presenting PIPEs all the time.  Tech companies should be able to do that with an SPO that works the same way as a direct public offering (DPO).  Crowdfunding portals associated with FINRA broker-dealers can easily handle DPO and SPO volume, and can develop aftermarkets that encourage more IPOs.  Portals like SecondMarket are already out in front.

Stick with the changes to Reg D.  The investor community has had enough time to adjust to the SEC's repeal of the ban on advertising and general solicitation of Reg D offerings.  Some critics still haven't made the adjustment.  Tough luck.  There shouldn't be any going back now and the SEC should stick to its guns.

Bring policy innovation to Canada.  Our friends in the Great White North should share in the new era of blessings that crowdfunding brings to investing.  Canada already has a robust reporting regime that allows for nuanced classifications of mineral and energy deposits.  This allows young companies to report results that can help them raise capital.  It's time the capital raising regime caught up to the mineral classification regime.  Canada's Venture Capital Markets Association (VCMA) is trying to move that country in the right direction.

Simplify restricted stock rules.  Rule 144 still contains minefields for investors holding restricted stock.  I believe the SEC should simply the processes available for owners to remove the "restricted" legend from a stock.  If I could wave a magic wand, I would eliminate the one year minimum that shell companies must wait after filing Form 10.  I also see no reason why the SEC requires an attorney's opinion prior to lifting a Rule 144 restrictive legend.  I do not expect the SEC to move on these matters until it is done wrangling with more pressing JOBS Act rules.

Publicize "reasonable steps" and "bad actor" provisions.  The startup community is still woefully unprepared to take the SEC's "reasonable steps" to verify an investor's accredited status.  They may also not know that getting involved with "bad actors" can destroy their ability to raise capital if the SEC discovers such a relationship and imposes a sanction.  The SEC could make it easier by publishing description of those two concepts in big, bold letters on its JOBS Act pages.  I don't expect that to happen, so these subjects will remain lucrative practice areas for law firms that pitch services to startups.

Clarification on Edgar filings.  The SEC requires publicly traded companies to file their financial statements on Edgar.  Startups who migrate entirely to capital raising via crowdfunding portals will IMHO become de facto publicly traded companies.  I do not know whether this means they will have to file on Edgar.  The SEC should get ahead of this now and issue some regulatory guidance.  It shouldn't have to wait until investors start suing small companies for not publishing on Edgar if they are supposed to be exempt.

The SEC has a small business guide and IMHO it should clarify the topics I discussed above.  Crowdfunding is the latest policy innovation that follows naturally from the success of the Small Corporate Offering Registration (SCOR) regime.  The NASAA guidelines on SCOR are far simpler than anything the SEC has put in place for the JOBS Act.  It would be nice if everything in finance were so simple.  

Non-Financial Companies Should Not Operate Crowdfunding Portals

I attended a holiday party last month where one of the nameless wheeler-dealer types in attendance bragged that his technology company was planning to launch a crowdfunding portal.  His logic was that developers using his startup's tech could help build their ecosystem by attracting investment partners.  He shrugged his shoulders when I told him that FINRA regulates portals and will probably mandate more formal affiliations.  I was really put off by his nonchalance.  Needless to say, he never followed up with me but eagerly took business cards from suckers in attendance.

That conversation left me wondering whether it is appropriate for a non-financial company to own and operate a crowdfunding portal independent of a broker-dealer.  I totally understand the need for technology companies to develop ecosystems of partners and developers.  That's what enables app stores' success.  The difference is that app stores merely display retail products and don't raise investment capital.  An app store is not a fundraising platform for companies offering ownership of their future revenue.

FINRA is still soliciting interim funding forms from portals.  These animals called "crowdfunding portals" still don't have the SEC's equivalent of a zoological classification.  That allows everyone and their cousin to create their own platforms from white-label technology providers like Launcht with no regulatory supervision.  The first lawsuit from a disgruntled investor who invested through an unregistered crowdfunding portal run by a non-financial company will ruin the operations of every other portal that didn't seek FINRA registration or brokerage affiliation.  The portals that don't take those steps may be ignorant of the auditing and recordkeeping requirements that come with fiduciary duties for investors.

I almost phrased the title of this article as a question:  Should non-financial companies operate crowdfunding portals?  I decided that I had to come down firmly on the "no" side of that question because that's the only way I can think of to protect investors from predators running baloney portals.  It's the Wild West out in crowdfunding land and these tumbleweed towns called portals really need a sheriff.  The SEC proposed a 585-page crowdfunding regulation last October and it is still not finalized.  Portal operators need to read the fine print of this soft law starting right now.  It currently exempts portals from registering as brokers and allows them to collect "success fees" instead of brokerage commissions.  I don't know what the final regulation will say but there's a lot of minutiae buried in those 585 pages that will trip up anyone not paying attention.

The freewheeling dude I met was with a tech startup that does not have the internal risk management and recordkeeping architecture common to financial service providers.  Anyone who thinks companies making software and hardware can run their own portals is in for a rude awakening when financial regulation compliance smacks their company hard.  

Checking Out VEDC Access to Capital San Francisco 2013

The VEDC Access to Capital Business Expo in San Francisco has become one of my perennial favorite conferences.  I had to attend and check out innovations in raising capital for small businesses.  The Hyatt Regency San Francisco never disappoints with hospitality.  VEDC renamed the conference this year as "Here's the Money!" instead of just asking where the money hides in years past.

Check out the awesome signage above.  You just can't go wrong with signs like that showing you the way to money.  I would posts signs like that around my home office but they would just get in the way of my daily moneymaking.  VEDC comes all the way up to San Francisco every year to show us the money, which is a long trek away from their usual SoCal partnerships with organizations like Golden State Certified Development Corporation.  They've been reaching out for partnerships with Mission Economic Development Agency here in town and the Nevada Microenterprise Initiative.  Where's the money?  It's here, there, and everywhere.  I noticed that the conference also coincided with an unaffiliated event, EO Alchemy 2013, at the same venue.  The entrepreneurs doing their alchemy may have had no idea that Access to Capital was just around the corner.

The introduction from VEDC announced their new venture, Aquaria Funds, specifically to operate outside Los Angeles.  I think it's great that VEDC created a vehicle that entrepreneurs can use to obtain capital in addition to other local microfinance partners.  They also offer more conventional SBA loans.

I started my morning checking out the session on startup financing.  Interstate Business Capital mentioned cash advances on purchase orders and other merchant advances but I'm pretty sure those are only options for revenue-stage companies.  No one can offer advances for purchases that haven't been made if the business is still trying to launch itself.  There just aren't accounts receivable to accelerate or accounts payable to defer at most early-stage startups.  Kiva Zip is enlisting its microlenders as evangelists for the non-profit projects they launch.  That's great for Bay Area do-gooders.  The Green2Gold guy, Bruce Blechman, mentioned CCVF's Clean Business Investment Summit and their founder's radio show on new venture money.  Bruce is a genius and his rapid-fire rundown of non-bank lending, licensing, collaborative co-ops, advance order funding, and sweat equity is like a five-minute MBA education.

I slipped in to the concurrent seminar on financing for existing businesses but it was mostly a panel of larger banks discussing their established loan programs.  Banks look at an industry's default rate in addition to a business' specifics, which will disappoint a lot of the aspiring restauranteurs and beauty parlor owners attending this conference.  It's good to know that SBA-backed financing covers a ten-year cycle for equipment instead of banks' normal five-year cycle considerations.  That was all I needed to know before going back to the last part of the early-stage financing panel.  I was pleasantly surprised to hear that Chinese entrepreneurs were successfully pushing their government to crack down on IP infringement.  I'd like to see more confirming evidence of stronger Chinese IP protection before I revise my low opinion of the rule of law in China.  In the meantime, there is such a thing as insurance against IP infringement.  It works just like other policies with premiums and deductibles.  Yeah, just don't tell the ACA exchange folks about it, or they'll force us all to buy it with another mandate.  Startups who want to protect their IP as early as possible should file a provisional patent application with the USPTO.

Strolling the expo floor meant listening to bank loan sales pitches.  My eyes doth glaze over when I hear big banks say they have a community bank culture.  Sorry, but I'm not a believer.  Only two things determine a large corporation's culture.  Number one is the CEO's personality and expressed strategic goals, because other executives will model that behavior and push their business units to meet those goals so they can get promoted to the C-suite.  Number two is the HR department's policies on hiring, firing, promotions, and performance bonuses.  Those are the hard incentives that motivate human behavior.  Any big bank that aspires to live a community bank culture would have to devolve so much autonomy to its local branches as to make its corporate structure nonviable.

I sat in the next session introducing local resource partners.  The usual cast of characters from the SBA, SCORE, SBDC, Operation HOPE, and others were on hand.  The Renaissance Entrepreneurship Center, San Francisco Community Business Resources, Pacific Community Ventures, and OBDC's Bay Area Small Business Finance were also in attendance at the expo.   I would have preferred to see the San Francisco Center for Economic Development (SFCED) in attendance but alas, it was not to be this year.  Entrepreneurs from underrepresented demographics need to check out California's Veterans Business Outreach Center.  I'll give you this panel's best quote, free of charge:  "The one time a banker won't give you an umbrella is when it's raining."  That means banks won't give you a loan if your business is losing money or the microeconomic climate for your sector has a poor outlook.

The most valuable insights I got out of that local partners panel was from the SCORE guy who previously worked with Harvard Angels and Sand Hill Angels on early stage investing.  He said records of the term sheets and signed subscription agreements that support a startup's capitalization table are a must.  Banks and angel investors will want to review those documents during their due diligence phase.  Corporate structure is the key to determining capitalization structure because it must allow for selling equity shares.  The choice of an S-corp or C-corp IMHO depends on how rapidly the business expects to scale up.

One participant at "Here's the Money!" mentioned Wells Fargo's financial support of microfinance platforms, which I presume to be Grameen America.  I've blogged before about how SIFI institutions will eventually purchase microfinance and crowdfunding platforms to broaden their product offerings.  The consolidation won't start until the SEC finalizes the regulatory structure enabling the JOBS Act.  You heard it here first.

The keynote speaker after lunch was Kevin Harrington, a TV pitch innovator who brought you Ginsu Knives on shopping channels and infomercials before he joined the Shark Tank show.  I'll share his tips on "Creating Brand Success" pretty much verbatim because they apply to lots of different business types.

Kevin liked the "Three Steps and a Stumble" approach to raising capital and growing a business.  Step One is "curiosity overload."  Deep market research reveals product trends, so collect industry publications and attend trade shows.  You know what . . . that's exactly what I do.  Step Two is "hijack your habits."  Think outside the box.  Make things happen.  Don't do something the same way forever because business changes quickly.  Hey, I do that too.  Step Three is "build a brand for both the company and yourself."  Man, this guy must be reading my blog because surely he recognizes the pure unrivaled genius that is both Alfidi Capital and Yours Truly, Anthony Alfidi.

Kevin also laid out five skills for entrepreneurs.  Here they come.

- Skill One:  Create the perfect pitch.  Show healthy profits, exponential growth, acquisition opportunity, strong market, bootstrap capital from founders, uniqueness, powerful presentation using his "tease / please / seize" structure, the industry gap you fill (which I interpret as the pain points you solve), and your exit strategy.

- Skill Two:  Publish.  The business plan must have an executive summary, industry overview, competitive analysis, marketing plan, strong financials, and an exit strategy.

- Skill Three:  Productize.  Show your product's mass market, problem solving ability, uniqueness, magical transformation, celebrity endorsement, multi-functionality, credible testimonials, documentation and clinical studies, publicity, and value proposition compared to cost of goods.

- Skill Four:  Profile.  New media accelerates publicity.  Smartphones now have multimedia production capabilities equivalent to a full broadcast studio.  Shooting smartphone videos for YouTube will go a long way.

- Skill Five:  Partnerships.  Find parties with resources you need, and offer them resources they need.

Now for the "stumble" Kevin mentioned.  If you must fail, do it fast and cheap.  Make it up on the next venture.  Kevin shared videos of a lot of his very successful infomercial products and few that were disappointments.  No one remembers your disappointments if you recover and follow up with new successes.

These VEDC events are highly condensed equivalents of college seminars in finance and marketing.  So where's the money?  Well, here's the money, in my wallet.  It's yours too once you line up investors and creditors who have confidence in your business prospects.  Don't ask me for money.  Go out and find it with the local partners VEDC lined up for you.  

Alfidi Capital Heard Roger Royse at Idea to IPO's Current State of Crowdfuning

I'm always checking out startup action in Silicon Valley.  The JOBS Act of 2012 was supposed to make that easier.  Performing due diligence online is one thing but actually closing an investment round is quite another.  The Idea to IPO Meetup group presented Roger Royse of Royse Law Firm last week down at Menlo College to give us all a rundown of the current state of crowdfunding.

The JOBS Act was intended to further democratize the venture investment playing field so that securities laws could catch up to technology.  Roger mentioned that the cost of fundraising has dropped in recent years and technology has expanded the types of offerings available.   He's published some good info on crowdfunding at his Royse University site.  The complications for startups raising money through crowdfunding portals can be tricky if those portals are open to any investors other than venture capital funds or angel groups.

The JOBS Act was supposed to make venture investing easier for individual investors but the SEC's rule changes so far are intended to apply to accredited investors.  Roger mentioned that Title III of the JOBS Act for retail investors does not yet have the force of law because the SEC has not yet finalized regulations.

Roger noted that venture capital firms have already begun stigmatizing crowdfunded companies as being otherwise unfundable.  Crowdfunded companies may find themselves in a "market for lemons" if they cannot obtain a subsequent funding round, forcing them to focus on an exit strategy.  I've heard VCs on public panels mention crowdfunding as marginally useful in extending the life of a startup that could fail prematurely, but that is probably a minority opinion.

Companies can advertise on crowdfunding portals for accredited investors now that the SEC has lifted the general solicitation prohibition.  The challenge for startups is that the SEC's rules are still in a state of flux and FINRA is still working on certifying crowdfunding portals that comply with the rules.  The SEC may be considering easing some investor verification requirements.  Roger thinks this environment is why startups need to get more conservative and refrain from discussing their financial status until the SEC finalizes more rules.  Pitchfests in front of investor panels may be considered a general solicitation.

I appreciated Roger's revelation that the SEC now considers a one-time placement fee for locating funding to be a transactional relationship requiring a registered broker.  I used to hear stories from old finance hands about how they earned finder's fees for connecting deal flow to investment banks on a freelance basis.  I had considered doing that myself for a while but I elected not to keep my securities licenses active once I launched into public commentary in 2008.  I was very aware (during my financial advisor days) of the SEC's guidance on public commentary for those who maintained securities licenses and fiduciary relationships.  Assuming a role as public commentator required me to surrender any and all means of maintaining fiduciary relationships or mediating transactions.  There are ways to navigate conflicts of interest but I'd prefer to avoid conflicts entirely.  I don't play games with my career or the law.  All I do now is speak my mind and invest my own money, any way I like.

Roger's talk was awesome and he covered way more legal ground than I can summarize here.  I spoke with him and some other entrepreneurs afterwards on the future usefulness of crowdfunding in such a complex regulatory environment.  I now believe the main advantages of crowdfunding for startups are the reduction of friction in closing deals and the compressed time windows for feedback.  Friction is lower on those portals that have broker/dealer affiliations, because accredited investors can theoretically complete a transaction online.  Feedback times are shorter because a startup can now appear in front of the entire early-stage investor universe simultaneously instead of spending months getting on the meeting calendars of angel groups up and down California.  The speed of feedback from investors, either positive or negative, will help startups pivot earlier if they combine it with feedback from their CustDev efforts.  BTW, I'm still convinced that those portals showing early success in generating deal flow will become acquisition targets for major brokerages.  They will be even more attractive if they add microfinance and P2P lending functions.

I'm already applying some of the insights Roger shared.  I've been attending pitchfest and business plan competitions for years.  I even pitched a tech startup idea myself as an undergrad at the University of Notre Dame in 1995.  I didn't state any disclaimers back then and neither have any of the entrepreneurs I've heard since then.  That is all going to have to change very quickly.  I attended a pitchfest in San Francisco last Friday and noticed that the startups in attendance need to get legal advice, get their paperwork in order with the SEC, and start using legal disclaimers that investors like me will respect.  They also need to be mindful of the FTC's privacy policy guidance if they handle customer data.  Failure to do so can subject them to severe regulatory sanctions.  I care as much about my own portfolio as entrepreneurs do about their startups, which is why early stage founders need to mitigate regulatory risk by keeping top advisers like Roger Royse in their hip pockets.

Full disclosure:  I have received no compensation from Roger Royse, his corporate entities, or the Idea to IPO Meetup organizers for this article.  This article, or anything else published under the auspices of Alfidi Capital, does not constitute legal or financial advice.  

Due Diligence on Small VCs and Angel Groups

The largest VC funds have the resources to perform legendary feats of due diligence on startups.  They can hire private investigators and run background checks to verify that entrepreneurs really are who they say they are.  Entrepreneurs have little comparable power to investigate investor groups unless they've had training as private investigators, law enforcement officers, bank examiners, forensic accountants, investigative journalists, or intelligence analysts.  This asymmetric relationship cries out for remedy.

The National Venture Capital Association and Western Association of Venture Capitalists have very well-defined criteria for membership.  Smaller VC funds and angel groups will fly under NVCA's radar and escape notice.  Checking out investors through the National Association of Seed and Venture Funds or National Association of Venture Forums would help if either of those organizations had a verifiable address, contact person, or website.  Those all seem to be dark at the time of this writing.  The Angel Capital Association and Small Business Investor Alliance are active with venture investors.  The National Business Incubation Association tracks the enabling ecosystem for entrepreneurs.  If I were a startup, I would inquire with those types of organizations to see if the VC/PE/angel investor promising to commit to me has a verifiable reputation.

Local chambers of commerce can be a source of background info on prominent venture investors if they're in traditional hotbeds of startup activity.  Read that as Silicon Valley, Silicon Alley, Boston/Cambridge, and North Carolina's Research Triangle.  Startups in other parts of the country used to have to wing it the old fashioned way by asking around local merchant groups about their prospective investor's reputation.  That is about to change in a big way.

The crowdfunding revolution will be a blessing and a curse for both investors and entrepreneurs.  Startups will face more reporting requirements but a cottage industry of advisers will spring up to help them.  Crowdfunding portals must verify the status of their accredited investors before they can commit money, so a portal's validation is a clear indicator to a startup that a prominent investor has some bona fides.  The non-accredited investors are a different story, so startups must accept the risk that those folks are just like their mom and dad putting in a few hundred bucks for gas money.  This revolution will not be televised - it will be webcast, with embedded data.

BTW, you won't find Alfidi Capital listed in any of those national VC/PE organizations at the present time.  I am what I say I am:  a non-accredited investor with lots of Web opinions.  I'm on several crowdfunding portals as a spectator rather than an investor, and whatever I do on those portals will be in accord with what the SEC allows someone of my status to do.  If my cash and sweat equity investments in a handful of startups pay off, my status will change overnight and I'll be driving a Ferrari to meet VCs instead of my old Ford Mustang.  Right now I use crowdfunding portals to educate myself on startups in my favorite sectors and watch angel groups I've never seen before.  They all have to disclose their status and I get to see some of their potential deal flow.  That's my asymmetric remedy.

SEC Lifts Ban on General Solicitation to Turbo-Charge JOBS Act

Today the SEC lifted its ban on general solicitation.  This is good news for startups who want to raise money under the JOBS Act if they can adhere to all of the required disclosures.  Companies must now submit very detailed documentation of their fundraising to the SEC if they want to remain compliant.  This is good news for securities attorneys and compliance consultants who will now be fully employed by startups requiring their services.

I tuned in to today's webinars from SeedInvest and Crowdfunder.  The new implications of Reg D are massive.  Investors need to know that merely claiming to have accredited status won't be sufficient to stay out of trouble.  They need to document their income and net worth if they want to play with startups under the JOBS Act.  Accredited investors could also have a third party (CPA, RIA, etc.) document their status.  I'm still not clear on whether public events such as product demo launches, angel pitchfests, accelerator or incubator workshops, and business plan competitions will require presenting companies to file disclosures prior to appearing.  I also wonder whether the SEC will pay a bounty for turning in "bad actors" who continue to abuse securities regulations. I would like to see these matters clarified on the SEC's JOBS Act page.

I am not at present an SEC-defined accredited investor, so I must of course adhere to SEC rules, FINRA rules, and crowdfunding portal rules to stay on the right side of the law.  I have always had a clean record and I am going to keep it that way.  BTW, this blog article does not in any way constitute legal or financial advice.  Startups seeking legal counsel on raising capital need to talk to one of the overworked securities attorneys I've seen around Silicon Valley.  

The Arrival Of Geojournalism

Tonight the Commonwealth Club asked "Does The Environment Matter?"  I was there.  It really should have asked whether journalism matters.  Traditional news media have been in decline for years.  Newspapers can't compete with the advertising reach of online media.  I think too many journalists are still enthralled with old-fashioned media doing old-fashioned beat reporting.  The new beats are all online covered by bloggers like Yours Truly.  The number of full-time journalists has declined but the amount of informed commentary available online has exploded.  Journalism is morphing into a concept that fuses data analysis, geospatial mapping, and time-series reporting.  This is the realm of the "geojournalist."

The geojournalist uses GIS tools to embed text and data within photos and maps.  This requires skills in data mining and content curation that aren't taught in journalism schools.  I think an open-source knowledge management practitioner (ahem, Yours Truly once again) qualifies as a geojournalist.  It also calls for some mobile media savvy.  I noticed one hot journalist babe at this CW Club talk tonight use her smartphone to record one of the panelist's answers.  Old-fashioned note-taking will soon give way to digital tablet notations for geojournalists who embed their stories into maps on the spot.

Some environmental media sites are doing geojournalism well.  InfoAmazonia tracks reports by map location within the amazon rain forest.  ClimateCommons adjusts US temperature data for anomalies like industrial emissions.  Internews teaches social media techniques to aspiring geojournalists in developing nations.  Interdisciplinary academic initiatives like the Yale Project on Climate Change Communication need to adapt geojournalist techniques if they want to be heard.

Other digital media can adapt to the new realities of crowdsourcing and crowdfunding.  Journalists are IMHO too dependent on foundation grants and PBS money.  I've seen some filmmakers pitching ideas for short films on crowdfunding sites.  This could work for investigative journalists making documentary films that can embed into GIS maps if geojournalists think like entrepreneurs.  They need an elevator pitch to get donors' attention and market data on the size of an audience for their project.  Market data for short films is easy to find with view counts for similar content on YouTube.  I say the Society for Environmental Journalists should teach startup thinking to geojournalists.  Just ask me how to do it and I'll show you if the price is right.

Later Exits for Earlier Startup Investors

One truism in startup funding is that venture capitalists want to see a clean cap table before making a big investment.  Some VCs don't like an excess of FFF investors - friends, family, and fools - who may pester the big-shot VCs and their hand-picked board members with juvenile questions.  VCs sometimes ask founders to buy out their amateur partners so the cap table isn't so crowded.  The "how" of this buyout is open for debate.  I don't know if VCs expect the founders to commit whatever limited personal liquidity they have to a limited buyout, or if the VCs will allocate part of their own funding commitment for the FFF buyout.

I think VCs' cap table expectations are going to be increasingly frustrated as crowdfunding reaches its full potential.  Crowdfunded companies are eventually going to raise a lot of early stage money from plenty of people.  The FFF pool will grow exponentially and a lot of them won't be willing to sell until the startup reaches a mature exit.  Crowdfunding portals that operate secondary markets will see more early trading of these limited stakes and VCs will have to get used to using the price action as a factor in their valuations.

The good news for startups is that crowdfunding will keep many of them alive longer and help more of them reach success earlier.  The bad news for VCs is that they will have no choice but to tolerate more of those unwashed FFFs until the exit event.  Founders whose business plans anticipate raising significant VC money in later stages will have to think seriously about implementing shareholder buyback agreements and other founders' agreements early in their company's life.  VCs' attitudes toward some amateur investors didn't develop overnight and won't disappear until crowdfunding demonstrates its power to launch successful startups.

The Haiku of Finance for 06/17/13

Crowdfund real estate
Locally own small projects
Big parcels later

Crowdfunded Real Estate Limitations

The crowdfunding phenomenon is now taking on real estate investing.  Sites like RealtyShares and iFunding are enabling small-time retail investors to become silent partners in projects they could not otherwise afford.  Passive investments in real estate have been around forever in the form of limited partnerships.  Crowdfunding things like trust deeds just lowers the entry barrier.  It does not change the threshold for due diligence.

The key to success in real estate has always been location, location, location.  A crowdfunding investor can only perform a minimal assessment of a property's value without physically visiting the property. Anyone can log on to Zillow and view the most recent valuations of neighboring properties, or check a parcel's assessed value at the county assessor-recorder's office.  Those are beginning steps.  The next steps involve property appraisals, traffic analysis, and other checks on the track record of property managers.  Those things can be crowdsourced to some extent but there's no complete substitute for traditional on-site legwork.

Investing in residential property since the housing bust poses additional challenges.  Getting clear title is a problem if a home mortgage was bundled and changed hands several times.  I can't know whether a given trust deed on a crowdfunding portal has title problems without checking with a title search company first.

I am concerned that novice investors could be hurt by a severe downturn in the housing market just as they were hurt in the housing crash that started in 2006.  Buying a share of a note secured by a trust deed is like becoming a hard money lender rather than a title owner.  The investor owns a share of a syndicated loan, denominated in dollars as a fixed-income instrument that pays a predetermined yield.  If the US economy experiences high inflation, those note owners will see the value of their note evaporate as the dollar loses its value.  Meanwhile, the actual property owner (either through an LLP, private REIT, or whatever) laughs all the way to the bank at the stupidity of those crowdfunding note holders.  That doesn't happen in normal times but these aren't normal times.

I think crowdfunding would work best for small projects that members of a community can see firsthand.  Urban farmers could form a land trust, for example, and crowdfund it to establish community gardens in a blighted urban neighborhood.  Charities like Habitat for Humanity could crowdfund a housing project for a low-income buyer and hand them title when the project is done.  The valuation for such projects would have fewer variables to calculate because they're brand new and presumably unencumbered with the problems of previous owners.  Crowdfunding portals can eventually be useful for conventional real estate investors once the housing market stabilizes, with the median property value for a given metropolitan area at somewhere between 2x and 3x of the area's median income.  I am looking forward to seeing miscellaneous real estate investments like liens and rights-of-way traded on crowdfunding portals.

Investors who have neither the time nor skill to evaluate a crowdfunded real estate project can always choose a publicly traded REIT or real estate index fund (or ETF) instead.  A widely held fund has two advantages over a single property.  It has no entry barriers or limitations for non-accredited investors and it arbitrages away the location problem by holding a large number of properties.  Maybe some sharp investment manager will crowdfund a private REIT.

The Haiku of Finance for 06/01/13

Crowdfund your project
Co-op, land trust, or maker
Wealth from the ground up

Crowdfunding for Decentralized Wealth

I attended a Commonwealth Club lecture today by Gar Alperovitz, author of What Then Must We Do?  I won't spoil the book for you, but he contends that the concentration of the control of wealth among a small elite and a handful of corporations make America's systemic problems unsolvable.  Labor unions are no longer powerful enough to serve as a countervailing power to corporate control of wealth and state socialism is an unsatisfactory alternative to free markets.  His solution lies in democratic, decentralized ownership of wealth.  I think he'd really like the concept of resilient communities but he touched on older concepts that already work.  He mentioned some models; I'll mention others.

The Democracy Collaborative's Community Wealth project is a clearinghouse for models that share access to capital.  The National Cooperative Business Association is a home for co-ops that have been around forever.  The Bank of North Dakota is the only state-owned bank in America and it's been successful for almost a century in providing capital to private enterprise.  Many of us have seen NCUA's credit unions in our communities.  Entrepreneurs who sell their companies to their workers' own ESOPs can reap very attractive tax benefits.  Real estate investors can use land trusts to limit liability and expand their options.  The Mondragon Corporation is an example of how a cooperative ownership structure can adapt to a complex enterprise.  The University of Wisconsin Center for Cooperatives studies, well, what else but co-ops.  The Hub is a global network-cum-movement for microenterprises with a Bay Area presence.  B-corporations are not-for-profit corporations that are chartered to serve a public interest.  CiviCRM is an open-source platform for fundraising and contact management; I regret that I missed CiviCon 2013.  I also regret that I'm missing the Public Banking Institute's  Public Banking 2013 conference this weekend, but I've already got plenty to do.

Some of these models may seem a bit touchy-feely and environmentally green for die-hard free market fans but I hope they get over that knee-jerk reaction.  I'd like to see an ecosystem of these types of grass-roots financing and organizing tools grow up as alternatives to the unstable model of TBTF megabanks that are wrecking the economy.  There's enough room for profit in these enterprise structures for conservatives to like.  The New America Foundation's Asset Building Program sure looks a lot like George W. Bush's call for an "ownership society."

The hodge-podge list of tools above begs a return to the author's question about what we must do now.  I got a chance to ask a question of my own when I asked Mr. Alperovitz how the crowdfunding phenomenon can contribute to the growth of these concepts.  He was optimistic about the potential of crowdfunding but didn't have specific data on hand.  There's my window of entrepreneurial opportunity.  I'll get specific right now.

B-corps are already using crowdfunding platforms like Kickstarter and Indiegogo to raise donations.  Once FINRA finally completes its SEC-mandated certification of crowdfunding portals for JOBS Act compliance, they can raise equity capital.  I think public banks operating in each of the fifty states could operate their own crowdfunding portals.  Anyone who wants to start a co-op or credit union could step on up and launch fundraising from the public bank's portal.  Companies that sponsor ESOPs could borrow directly from the public banks so the ESOP can buy the company's shares.  REITs that organize as land trusts could use the public bank for 1031 exchanges and trust services.  Makers, here's your chance to grow new organizations making brand new things.

The ecosystem I just described above will probably require legal changes that will enable public banks and crowdfunding portals to work together in the ways I've imagined.  State governments can perform their traditional role as public policy laboratories by experimenting with different forms of governance for this co-op ecosystem.  Resilient communities will need a myriad of management structures and funding mechanisms. Entrepreneurs should educate policymakers on how to make this happen.  That is what we must do, answering the question above.

Jump on the Frugal Innovation Bandwagon

Today's Commonwealth Club panel on "Frugal Innovation" was a call to action for American innovators stuck in cubicles and pondering their next move.  General Electric is looking for small-scale innovators they can hire as engineers.  CFSI wants small banks to create products for the underbanked market.  Rock Health is developing cheap medical devices that graft onto existing technology.  TechShop is launching maker-spaces and developing curricula for DIY inventors.

DARPA's iFAB program is helping launch this phase of the Industrial Revolution.  I'm particularly intrigued by TechShop's partnership with DARPA and the VA to open maker-spaces to veterans.  TechShop's CEO Mark Hatch was right on the money when he said existing educational institutions will never meet the training needs of the maker revolution.  I could not agree more.  My own MBA in finance won't be worth the ink used to print it when the maker revolution gets into full swing.  Classes from TechShop and General Assembly will be much more useful to capitalists.  Veterans need to check out the VA's Center for Innovation to get into TechShop's pipeline.

I asked the first audience question about how crowdfunding can support frugal innovation and got some good answers.  Many projects launched from TechShop got crowdfunded and some portals can be good sources for early validation of market demand.  My membership in the Commonwealth Club pays for itself with these events.

Here's one more frugal innovation worth a mention.  The BIL Conference has started as a frugally innovative answer to the TED Conference.  It's a play on the movie Bill and Ted's Excellent Adventure from the 1980s.  The thinking behind BIL is that TED has become too high-concept and unapproachable, so BIL aims to be smaller for the DIY crowd.

These are the kinds of things creative people need to be doing instead of congregating around a water cooler and playing nice with stupid supervisors.  I'll be watching my favorite crowdfunding portals to see whose DIY idea gets traction.

Report From 3rd Annual New Paradigms to Fund Life Science Innovation Conference

I sure do get lucky sometimes.  Last week JP Morgan held its famed health care conference in San Francisco.  I didn't get invited to that one but I scored something just as valuable.  I got to sit through several sessions of the 3rd Annual New Paradigms to Fund Life Science Innovation Conference at the Marines Memorial Club.  I didn't have time to attend the entire conference due to my meeting schedule but I enjoyed the funding panels.  My synopsis is below, with my own special insights in italics.

The panel on "Government Investing Opportunities to Fund Life Science Innovation" had experts from the National Institutes of Health and National Cancer Institute.  They put real teeth in the old saying, "I'm from the government and I'm here to help."  The NIH maintains a free biobank for research and uses its grant program to leverage other government resources in gene therapy, cell therapy, and production assistance.  The NCI manages an active portfolio of about 50 SBIR (Small Business Innovation Research) grants and also offers bridge financing and regulatory assistance.  The advantage of government agency SBIR grants is that they are non-dilutive funding that doesn't take IP away from a developer.  NCI even sponsors an investor forum matching successful Phase 1-2 startups with investors who will fast-track their product.  Hey, last year they held it in Santa Clara, so I ought to see if I can attend this year.

The panelists had a consensus on how biotechs execute successful fundraising.  Startups should have a good team, IP amenable to protection, and an explanation of how the proposed product meets an unmet market need.  My own interpretation of "good team" encompasses someone who is scientifically qualified to invent a device or discover a drug, plus a capable executive with serial entrepreneur experience.  Several years ago when I first started studying startups, I noticed the successful ones had teams with both scientific and managerial skills.  That insight comes in handy when making investments, and one panelist observed that academic researchers have little understanding of commercialization or manufacturing. This is why the best business schools create partnerships between their MBA candidates and their own university research labs.  These partnerships create business models for commercializing the lab researchers' tech and are favorites to win business plan competitions.  

NIH gives startups guidance prior to submitting their SBIR grant request.  I'm thrilled to see government agencies focus their grant funding on the successful commercialization of a product rather than just keeping startups alive.  Heaven help us if the SBIR process turns into a make-work program for unemployed scientists.  The panel mentioned the "numbers game" aspect of successful grant funding, with only 15% of grant applications getting funded, so startups need to work hard on their grant applications.  One panelist mentioned that DOD grant makers are risk-averse, so having a strong relationship with DOD is the key to getting their research grants.

I learned a new acronym from this panel:  STTR, i.e. Small Business Technology Transfer, a program for fast-tracking the commercialization of federally funded research.  I also learned that many biotech startups are "virtual" but many grants require much work to be done internally.  Hmmm, that places virtuals at a disadvantage because they outsource things like clinical trials.  The government's workaround is to have the startup directly expense on their budget some functions outsourced to contract research organizations.  Startups who outsource functions must write deliverables into those contracts and enforce non-payment for lack of progress.

One panelist mentioned HHS's Biomedical Advanced Research and Development authority (BARDA) as a funding source with the caveat that its mindset favors the military's "quad chart" briefing system.  That makes sense to me if BARDA's mission is to fast-track biological warfare countermeasures that must support interagency efforts with DOD.  The takeaway is that startups must learn to summarize their value proposition in one slide with a picture of their drug or device, its costs, and their deliverables.

The panel noted that SBDC-funded consultants can help walk startups through grant writing.  Startups must frame their investment pitch in a way that non-expert angels and family offices understand, and SBIR grant success gives credibility as a form of peer-reviewed validation.  The NIH panelist noted the impact of leaner federal budgets, with the expectation that a sequester would reduce its budget by 8.2%.  NIH would likely cut current grants, reduce actual contract awards to 90% of their authorized level, and reduce the number of years for a contract to run.  The panel also said that startups can increase their chance of successful grant funding by having more preliminary data.

The next panel had an interesting title:  "Patient Advocacy Group and Passion Capital."  I had this mental image of hot nurses making out passionately with their patients, but alas that wasn't discussed today.  The panelists did mention what their organizations do:  The Thiel Foundation funds innovation capital for radical early-stage startups; the Cystic Fibrosis Foundation does venture philanthropy to de-risk new treatment methods for their typical patients; FasterCures is a think tank that coordinates venture philanthropy funders and develops new financial instruments.

This panel agreed that venture philanthropy is now part of Big Pharma's ecology because it helps de-risk innovation.  Some venture-philanthropists run clinical trial networks, patient registries, and other projects that help de-risk startups beyond just funding.  VP is not for the faint of heart because investments do fail.  Great risk remains in rare and orphan diseases.  Investors must see a developmental pathway to a viable drug.  VPs can fill the gap left as VCs retreat from early stage pharma funding.  VPs can take the tech they funded to corporate partners who can fund further development pathways.  Big Pharma has stepped in to the venture space to cherry-pick promising drug ideas, partly because they are reducing their own in-house development infrastructure.

The next panel was "Crowd Funding Options:  How to Raise One Million."  Ooh, goody, one of my favorite subjects.  The panelists all have startup backgrounds themselves, seeing niches in home equity finance and donor-advised funding that they could fill.  One of the CEOs argued that crowdfunding enables private equity investors to adopt a diversification approach to a portfolio.  IMHO this is a sea-change mentality from traditional pure play approaches in PE/VC.  The advantages that VCs bring to a startup besides money include mentoring and connection with other centers of influence.  It's good that entrepreneurs can access diverse sources of capital, but they need to know that the advice they get from nickel-and-dime investors will be nearly non-existent.  The JOBS Act updates Title III general solicitation rules and opens venture investing to non-accredited investors.  Entrepreneurs must use digital media to package their pitch attractively.  There is a fraud deterrent mechanism to answer critics alleging the JOBS Act generates a criminogenic business climate:  Funds raised on a crowdfunding platform are escrowed until the startup meets its funding target, and funds are returned to donors/investors if the target goes unmet by a deadline.

There's a rule in crowdfunding:  "Expect to lose your money," because it's risk capital.  One panelist mentioned that fraud is more prevalent now in regulated finance, as per Bernard Madoff and home mortgage lending.  I wonder whether the panelists read my article on the JOBS Act from last year, because they echoed some of the themes I raised.  Crowdfunding forces transparency by enabling public chatter in social media.

Startups can prove their valuation by generating social media buzz from their prospective market, thus proving the existence of demand that will drive sales.  One suggestion was to attract heavy Twitter users to a high-profile event and get them Tweeting about your idea.  Another panelist theorized that Millennials turned off by the stock market will instead invest in crowdfunded portfolios of projects.  Entrepreneurs can "build a wave" by offering freebies to early adopters who can spark passion in a product.  Perks, rewards, and bonuses attract people.  IMHO a crowdfunding platform that enables gamefication will attract startups and investors by the truckload.

I asked my only question of the conference at this panel:  "There's talk of large brokerages looking to acquire crowdfunding portals.  What qualities will make crowdfunding portals attractive to an acquirer?"  The panel answered that big banks don't yet see the intersection of social media and finance.  Portals will prove their value by attracting capital and deal participants.  I'm hereby summarizing this value proposition:  An attractive portal turns cash flow (funding from non-accredited investors) into deal flow (IPO and acquisition candidates for investment banks).  You heard it here first at Alfidi Capital.  

The final panel I was able to attend was "Biotech's Migration Outside the USA:  Where are the Emerging Opportunities?"  I don't invest much outside the U.S. but some of the cultural insights from this panel are useful to international investors.  Returning Chinese expatriates who were educated in the West bring life science expertise back home.  "Venture tourists" can visit startups outside the U.S. but the difficulty in doing deals varies by country.  Innovation as an ecosystem is attuned to local culture and takes a long time to create.  IMHO the rule of law is indispensable, so I wouldn't go looking for innovation in junta-ruled places like Myanmar; instead show me a locale that's at least one decade removed from authoritarian governance.  The U.S.'s NIH investments in R&D infrastructure really do matter.  Once again, show me a country that has such a nationally-sponsored laboratory system in place.  Several panelists mentioned the risk aversion of many traditional Asian cultures as a deterrent to startup investing, and that educated Chinese professionals make unlikely entrepreneurs because failure is considered shameful.

I had to split for another meeting but this conference was a great deal.  I wish I could have stayed for the Biotech Idol pitches because I love hearing directly from entrepreneurs.  See you next year, biotech all-stars!

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.