Founder Source Launches Campaign to Pass Florida Equity Crowdfunding Bill
On Monday Orlando startup Founder Source launched a GoFundMe campaign to raise awareness and capital for a bill to bring equity crowd funding to Florida.
The bill, sponsored by Florida House Rep. David Santiago of District 27, is named HB 275 and was unanimously approved this morning by the Florida House Banking and Insurance Committee, moving it a significant step closer to becoming law
HB 275 would allow any Florida resident to invest a portion of their annual income in a Florida startup through an approved equity crowdfunding platform. To date 15 states such as Michigan, Wisconsin and Alabama have passed a similar bill, leading to platforms like Michigan Funders and CraftFund, which allow instate residents to invest in local startups. The Florida crowdfunding bill was crafted using SEC comments on similar bills and best practices from existing state bills.
Echo Interaction CEO and Orlando Tech President Carlos Carbonell, along with Matthew Huggins, General Counsel for PowerDMS and Jonathan Kilman, partner at Foley & Lardner, recently created Founder Source as a platform to connect interested Florida investors with local startups and businesses seeking investment. The trio launched the GoFundMe campaign to raise awareness and educate both entrepreneurs and potential investors.
Click here to learn more about the Equity Crowdfunding Bill and GoFundMe Campaign.
“This bill would create more opportunities for Florida startups to raise money and grow their company here, keeping talented entrepreneurs in state and creating jobs,” said Carbonell. “It also opens a significant door to funding, especially if you’re at the earliest stages or are an experienced entrepreneur but don’t have the network to reach high net worth angel investors or venture capitalists.”
A study on Venture Backed startup demographics by CB Insights, a venture capital research firm working with Bain Capital, Deloitte and Microsoft, found that only 8 percent of venture backed startups are founded by women and less than 1 percent by African American or Hispanic founders.
Florida ranks 7th in the country for total venture capital investment with 45 deals for $863 million, according to a MoneyTree Report by PricewaterhouseCoopers LLP and the National Venture Capital Association. But the numbers are a bit tilted as a majority of that total was from one company, a $592 million investment in Magic Leap Inc of Dania Beach. Without the Magic Leap deal, Florida would have ranked 17th behind New Jersey, North Carolina and Maryland.
The engagement from an equity crowdfunding backer versus a kickstarter backer would be unique, said Alex Gramatikas, founder of ALTR, which makes custom clothing buttons. ALTR ran a successful kickstarter campaign in August 2014 to bolster production.
“But after the campaign, the customer doesn’t really have an incentive to keep promoting your product,” said Gramatikas. “If they’re personally vested, it’s like building a huge sales force across the state. They have an incentive to promote you not only because they find your service or product valuable, but also because they could get a return on investment.”
Trobo, a STEM education and storytelling robot, which raised $61,060 on Kickstarter, effectively launching the company, says the bill is an interesting option for startups.
“It depends on the company, what stage you’re at, and if want strategic investors like we do,” said Trobo co-founder Jeremy Scheinberg. “The biggest reason we did Kickstarter was to validate Trobo, but those campaigns take a lot of work to be successful, so if you’re raising $500,000, is it more efficient to get that from five investment groups or to appeal to a thousand small investors? It depends. But I am happy the option might exist.”
If you’re an experienced founder who has led a successful Kickstarter and has paying customers, but hasn’t been able to find the right Florida investor, the bill could be a game changer.
“It’s incredible,” said Eric B. Delisle, ICLOAK® Stik founder, who raised $100,603 on Kickstarter for a portable tool that allows users to surf the web anonymously.
Delisle has raised more than $3 million across two companies, one of which was acquired. Although ICLOAK has paying customers and has sold more than 2,400 units, they still have trouble raising money at home, which has driven Delisle to travel to New York, Boston and Chicago to find investment that would allow ICLOAK’s growth to meet its high demand.
“And that takes valuable time, so if this bill was passed and I could create a local campaign, it would be worth my time and effort,” said Delisle. “The fact is we’re primed for growth and I’m ready to hire at least two dozen people now if I had the funds, but my hands are tied because of the current rules. Once you’ve exhausted friends and family, you’re stuck. This bill could change that.”