DreamFunded News

White house
Demystifying Access to Capital for All Early Stage Science and Tech Entrepreneurs
Summary: More than 30 investors pledged to increase access to capital for science and tech entrepreneurs from diverse backgrounds, including by sharing tips for raising funds.
Today we shared highlights of the President’s work to stimulate and support entrepreneurship in America over the last eight years. Entrepreneurship is a key driver of economic growth and job creation and supporting our science and technology entrepreneurs, particularly ensuring entrepreneurs from all backgrounds and geographies have a shot to build and grow science and tech companies, is critical to ensuring we as a Nation continue to lead on innovation.

One of the critical pieces of many science and tech entrepreneurs’ journey is raising the capital needed to get an invention or innovation to market or a business off the ground. Yet for many science and tech entrepreneurs, especially first-time entrepreneurs, the process can be daunting and filled with new language, networks, and procedures. This week, a group of more than 30 organizations who fund and support early stage science and tech entrepreneurs came together to pledge to create more transparency and inclusiveness in their funding practices. These organizations represent more than 11,000 investors deploying more than $800 million in early stage science and technology investment dollars across the country. We talked to several investors who signed the pledge to get their best advice for science and tech entrepreneurs going through the fundraising journey as they launch and grow their companies. Read on for their tips and advice.

And if you’re an investor, we encourage you to share your tips and advice publicly as well so that more science and tech entrepreneurs from all backgrounds can take their best shot at growing and launching their companies.

Build Your Network

Many of the science and tech investors we heard from shared that funding opportunities generally come together based on a personal connection rather than a cold email, which means that building and growing your network is a key step in seeking investment capital. For entrepreneurs who aren’t already plugged into the investment ecosystem when they have their idea or launch their venture, networking can become a significant part of your job as a founder. Liz Roberts of MassMutual Foundation-supported Valley Venture Mentors suggested that science and tech entrepreneurs consider finding “a great, inclusive incubator or accelerator program that will help you build your network” and “will get you exposure to mentors and investors who can help your venture grow.” Kerri Beers of TechStars urged tech entrepreneurs to participate in meetups and events “in their local community” that are targeted at entrepreneurs in order to grow their exposure and connections. Diane Henry of Rogue Capital Advisors described this as “spending time in the natural habitat of investors.”

Henry urged science and tech entrepreneurs to “do their homework” since many investors publicly share what they invest in, and won’t even consider pitches that don’t conform to their focus areas. Nick Moran at New Stack Ventures advised that, as they go about networking with potential investors, science and tech entrepreneurs also “cut through the noise” by figuring out what they have in common with potential investors and connecting on those personal interests to make themselves more memorable. Aaron Walker from Camelback Ventures shared that he sees what entrepreneurs are talking about on social media and pays special attention when his organization is mentioned, often leading to companies and entrepreneurs ending up “on our prospect list.”

There are some very well-known science and tech investors out there, but they represent only the tip of the iceberg when it comes to access to capital. Rather than focusing on the small subset of investors you’ve heard of already, Tamra Johnson of 79 Studios pointed out that “there are a lot of people who care about bringing capital to diverse founders, and your time will be better spent getting to know them than trying to change organizations and institutions that have been in place for decades.”

Leverage Your Network

Once you’ve built your network and identified who you might want to meet with, it’s time to leverage your network to help make connections. Angela Lee of 37 Angels advised finding “connections you have in common” with that person on social media and then “make it really easy for your network to help you” by pre-writing introduction emails and being very clear about why you are asking for help to make the connection. Several investors mentioned that large percentages of their portfolio companies came through network connections and recommendations. Investors also pointed out that they look to accelerators and incubators to discover talent and companies that might be outside of their personal network.

Do Your Homework

It’s not just the ‘who’ but the ‘what’ of the deal that matters, too. Understanding term sheets can be challenging and you don’t want to be at a disadvantage when you’re at the negotiating table. Before raising money, Jonathan Towers from Arctaris Royalty Partners suggested science and tech entrepreneurs who are less familiar with finance consider “taking a course at their local community college, joining an entrepreneurial networking group, or asking private equity or venture capitalists in their region for coffee” so that they are best equipped to negotiate good terms.

Once you’re in conversations with investors that are a good fit for your science or technology company, it’s time to think through the mechanics of the deal. Early financing is rarely the last round of financing that a science or tech entrepreneur needs when growing a company. While raising a round at a startup it can be hard to think ahead to how things will look a year or two down the line when your company might only be a year or two old. But Lee cautioned: “Ask for enough money to get to the next round of financing.” Not doing so means “less of a marketing budget to go after customers, and less of a buffer if you get it wrong (and guess what: 93 percent of successful companies pivot). Ask for enough to get you through 18-24 months.”

These tips are only the tip of the iceberg! Building and growing a science or technology company is extremely hard work. As the President said when he proclaimed November National Entrepreneurship Month, we’re so excited to “celebrate the entrepreneurs who serve their communities and bolster our economy, and we pledge our support for them in their pursuit of the ideas and innovations of tomorrow.” If you’re an entrepreneur or considering starting a science or technology company, we’re rooting for you!

Laura Weidman Powers is a Senior Policy Advisor to the U.S. Chief Technology Officer in the Office of Science and Technology Policy
DreamFunded Manny Fernandez Invited to the White House
On the 4th of October 2016 DreamFunded’s Co-Founder/CEO Manny Fernandez was invited by the Executive Office of The President to the White House to participate in a round table discussion on possible solutions to fund early stage companies in underrepresented communities in the United States. In the meeting was Megan J. Smith United States Chief Technology Officer and Assistant to the President and several other industry leaders. Manny who is a pioneer in the equity crowdfunding community was invited for his insights as a leader in the investment community, his experience as an angel investor, and as the founder of SF Angels Group.
Manny Fernandez featured as an Investor on CBNC's TV Show
CNBC’S ‘Make Me A Millionaire Investors’ Returns For Season Two On Thursday, October 6th At 10PM ET/PT

Hosts Deanne Bell and George Zaidan Help Inventors Take Their Products to the Next Level and Give Them a Chance to Secure a Potential Investment

ENGLEWOOD CLIFFS, N.J. – September 19, 2016 — CNBC’s original primetime series “Make Me A Millionaire Inventor” is back for season two on Thursday, October 6 at 10PM ET/PT with eight new one-hour episodes. Hosted by engineering experts Deanne Bell and George Zaidan, “Make Me A Millionaire Inventor” is on a mission to find the best inventions never made, and bring them to market.

In each episode, Bell and Zaidan scour the country looking for amazing ideas they’re convinced can make big money. They’ll track down the inventors and give them a second chance to bring their ideas and dreams to life. The inventors will be given the resources and help they need to take their products from concept to reality; they’ll prototype, test and perfect their inventions while preparing for the biggest pitch of their lives.

“Make Me A Millionaire Inventor” – Episode 201 – Life Savers Premiere Episode: Airing Thursday, October 6 at 10pm ET/PT

In the season premiere, two inventions with one lofty goal: save lives. Deanne meets an emergency nurse who has invented the “Goldilocks Valves,” a device that could revolutionize the way nurses and paramedics perform CPR. While George teams up with a retired firefighter who has spent the past sixteen years developing the “Aqua Blaster,” a harness designed to make fighting fires safer and easier for those on the front line.
California Hispanic Chambers of Commerce to Award Manny Fernandez 2016 Hispanic Shark of The Year Award

On Sep 21st, 2016, DreamFunded CEO, Manny Fernandez, was awarded the first ever Shark of The Year Award by the California Hispanic Chambers of Commerce during their annual convention in Riverside, CA.

SAN FRANCISCO, CA - During this year’s annual convention in Riverside, California, the California Hispanic Chambers of Commerce awarded DreamFunded Co-Founder/CEO, Manny Fernandez, the Shark of The Year Award. Manny is the first recipient to be given this award by the California Hispanic Chambers of Commerce(CHCC.) This award honors the recipient’s entrepreneurial spirit, deep understanding of the investment landscape, and innate leadership abilities driving startups towards success.

The California Hispanic Chambers of Commerce works through a network of regional Hispanic Chambers and business associations, it represents the interests of over 800,000 Hispanic business owners throughout the State of California. It is the largest regional ethnic business organization in the nation. The CHCC promotes, support and encourage the advancement, development, and economic growth of Hispanic entrepreneurs and California’s emerging businesses. The CHCC also serves as a platform for the exchange of ideas, information, assistance, procurement opportunities, or any other form of business opportunities which might enhance Hispanic and minority owned businesses.

Manny has been featured on several Hispanic media outlets such as Fox News Latino and CNN en Espanol to name a few. As an entrepreneur and angel investor, he sets the bar for other aspiring Hispanic entrepreneurs that lack the insider access to the network and capital of Silicon Valley.

During his acceptance speech at the CHCC Annual Convention, Fernandez said regarding equity crowdfunding, “This is what I am bringing to you, it is for us to win, it is us coming together, organizing for capital. I have seen it, I know how it works I have the knowledge, but I need others who want to use it to raise money from their community.”

Albert Clark who is a board member of the CHCC says “Manny has tremendous energy and is a phenomenal guy. He was one of our first sharks on the panel last year and I believe he will continue to be a shark for many more years to come.”
Press confernce
7-Key Principles of Equity CrowdFunding: Title III
May 16th, 2016, San Francisco CA- With the launch of Title III of the JOBS Act, also known as regulation crowdfunding, DreamFunded.com co-founders Manny Fernandez and Rexford R. Hibbs hosted a press conference Monday morning to inform the public about 7 key aspects of equity crowdfunding that are important for all potential investors and startups to know and understand.

The long awaited implementation of Title III of the JOBS Act (crowdfunding) enable everyday americans to invest in private companies for the first time in 83 years. Since the signing of the jobs Act in 2012, many questions arose as to how the rules would take shape. “We believe there are some misconceptions surrounding the new rules that we wanted to clarify for the public. We broke them down into 7 key aspects that must be addressed.” said DreamFunded co-founder & CEO Manny Fernandez.

As the law goes into effect today, many equity crowdfunding platforms, including DreamFunded.com will look into participating in equity crowdfunding for non-accredited investors.

DreamFunded co-founder & COO Rexford R. Hibbs was very excited when he addressed the media this morning. “The implementations of Title III will allow everyday americans to have the opportunity to achieve financial success that was previously only reserved for high net-worth individuals. Finally, the playing field is level.”

Manny Fernandez broke down the Regulation CrowdFunding law into 7 Key Principles:

Broker Dealer / Funding Portals - All equity crowdfunding transactions must take place with either an internet based registered Broker/ Dealer or new type of online entity called a Funding Portal. Both outlets must register with FINRA.

Issuer Limits - The SEC placed limits on the amount that both startups can raise and investors can invest.

Startups can raise up to $1,000,000 using Regulation CrowdFunding in a 12-month period.

Investors, both accredited and non-accredited are limited to $2,000 or a percentage of their income or net-worth as follows:

5% if the investor's income or net-worth is under $100,000.

10% if the investor’s income or net-worth is over $100,000.

Maximum cap 100K over a 12-month period for both accredited and non-accredited investors who are investing in equity crowdfunding (ECF).

Required Disclosures - Before starting an ECF campaign, startups must provide SEC specific disclosures to the SEC and the appropriate broker / dealer or funding portal. Startups must file an offering memorandum (PPM) with the SEC that will be publicly available on the SEC’s Edgar System.

Financial Review - In order for startups to be able to raise funding using ECF they must have annual reviews of their finances as follows:

100K max 12-month period with is certified by principal executive, CEO and also certain info from their tax returns.

100K-500K 12-month period- provide financial statement, which is reviewed by an independent accountant.

Startups looking to raise up to $1,000,000, the maximum amount allowed over a 12-month period, must provide financial statements audited by an external auditor.

Ongoing Reporting Requirements - Startups are required to file annual financial reports from the with the SEC but do not need to be reviewed or audited by an accountant or auditor after the original report. Each annual report must be reviewed by a principal executive officer and provide offering documents with all updated information without offering specific information. Updated financial statements do not have to be reviewed or audited by an accountant. When do the reporting requirements stop?

Full blown reporting company, such as an IPO.
All of shares were repurchase by the issuer or other party so there is no more outstanding shares that was sold thru equity crowdfunding.
If the company liquidates and goes bankrupt, the company does not have to continue reporting.
Filed at least one annual report and has less than 300 shareholders of record.
Filed at least 3 annual reports and the company has assets of less than 10 million dollars.

Furthermore, shareholder limits do not count if 3 of the following conditions are met:
Current in it’s ongoing reporting
Startup has a transfer agent
The assets of the company does not exceed 25 million dollars. If that happens the company has a grace period before company has to file the full blow reports and become a reporting company.

Resale Restrictions - Shares cannot be sold within 12-months of the purchase period unless any of the following exemptions are met:

Shares can be sold back to the company at any time.
If the shares are resold to an accredited investor.
If the shares are sold as part of a registered offering.
If the shares are transferred to a family member or in cases of death or divorce.
After 12-months (1-year), the shares will be freely tradeable.

Social Media & Pitching - One of the most important aspects of equity crowdfunding that most startup founders overlook is the importance of social media in relation to the success of their fundraising efforts. In most cases, startups will raise a significant amount of early funding from friends and family in their network. Having a strong social media presence on platforms like Twitter, Facebook and Linkedin can be the difference between success and failure. Another important aspect of equity crowdfunding that is overlooked is having a strong pitch deck. “On the due diligence team at DreamFunded.com and SF Angels Group I consistently review startups who submit sub-par pitch decks and it is often detrimental to the startup. Having a proper pitch deck can be the difference between funding someone’s dream and not at all. We have developed a free pitch deck guide that has helped startup founders raise millions of dollars. We want to help entrepreneurs succeed and we invite them to send an email to GetFunded@DreamFunded.com with the subject ‘Pitch Deck’ for a free copy.” said Rexford R. Hibbs.

To view the video of the press conference, visit: https://www.youtube.com/watch?v=t2ib9V9FaE4