FAQ: What the new U.S. crowdfunding bill means for entrepreneurs

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Scott Edward Walker is the founder and CEO of Walker Corporate Law Group, PLLC, a law firm specializing in the representation of entrepreneurs.

Last week, the U.S. House of Representatives passed a crowdfunding bill that will allow startups to offer and sell securities via crowdfunding sites and social networks. If passed by the Senate and signed off by the President, the bill will become a law, giving entrepreneurs new options for raising money for their companies. …

What is crowdfunding?

As the term suggests, crowdfunding is funding from a crowd of people; that is, many people provide small amounts of money to finance something. Crowdfunding has its roots in charitable causes, including the advent of microfinancing …

Can startups use crowdfunding now?

Under current laws, startups may not sell stock or other securities through crowdfunding sites or social networks… They may, however, accept donations.
This is because of applicable federal securities laws ... The laws include the following:

• A prohibition against “general solicitation” — which means that a company may not offer or sell securities unless there is a substantive, pre-existing relationship between the company (or a person acting on its behalf) and the prospective investor. (See “Can I Raise Money For My Startup Via Twitter?”)

• Disclosure and state law compliance requirements if the investors are not “accredited investors” — which usually makes the offering too costly and onerous. (See “Ask the attorney — securities laws.”)

• A requirement that any intermediaries (including websites) must be registered with the SEC as a “broker-dealer” in order to legally accept any transaction-based compensation in connection with the sale of securities. (See “Finder keepers could be losers, weepers”).

What will the new crowdfunding bill do?

Basically, if this new crowdfunding bill becomes a law, all of the foregoing prohibitions and requirements will be lifted, and a startup will be able to sell securities through crowdfunding sites like Kickstarter, or social networks like Twitter or Facebook, so long as the company (and its intermediary, if applicable) comply with the bill. According to the bill, the company will have to meet these key provisions:

• The company may only raise a maximum of $1 million, or $2 million if the company provides potential investors with audited financial statements.

• Each investor is limited to investing an amount equal to the lesser of (i) $10,000 or (ii) 10% of his or her annual income.

• The issuer or the intermediary, if applicable, must take a number of steps to limit the risk to investors, including (i) warning them of the speculative nature of the investment and the limitations on resale, (ii) requiring them to answer questions demonstrating their understanding of the risks, and (iii) providing notice to the SEC of the offering, including certain prescribed information.

Are there any downsides to crowdfunding for startups?

Yes, there are several key downsides that you need to be aware of before jumping into crowdfunding.
First, startups must understand that minority stockholders have certain significant rights under state law, including voting rights, the right to inspect the company’s books and records, the right to bring a derivative claim on behalf of the company, and certain protections against oppression by the controlling stockholders. …
Second, having hundreds of stockholders is an administrative nightmare and will be time-consuming and costly. …
Third, startups will likely have difficulty raising funds from VCs and other sophisticated investors if they have hundreds of unsophisticated stockholders. …

What’s next?

Now we wait for the U.S. Senate, … The White House supports the House bill, so upon reconciliation, it will be signed into law. Then entrepreneurs will have a new option to consider when raising money for their startup.

About the Author, Scott Edward Walker

Scott Edward Walker is the founder and CEO of Walker Corporate Law Group, PLLC, a boutique corporate law firm specializing in the representation of entrepreneurs. Scott has 15+ years of broad corporate law experience, including nearly eight years at two prominent New York City law firms. He has built a strong team of lawyers, with offices in Los Angeles, San Francisco and Washington, D.C. You can follow him on Twitter as @ScottEdWalker or check out his blog.

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Fat Replaces Oil For F-16s As Biofuels Head To War

Fat Replaces Oil For F-16s As Biofuels Head To War
Financial Advisor magazine

(Bloomberg News) Biofuels face their biggest test yet -- whether they can power fighter jets and tanks in battle at prices the world’s best-funded military can afford.

The U.S. Air Force is set to certify all of its 40-plus aircraft models to burn fuels derived from waste oils and plants by 2013, three years ahead of target, Air Force Deputy Assistant Secretary Kevin Geiss said. The Army wants 25 percent of its energy from renewable sources by 2025. The Navy and Marines aim to shift half their energy use from oil, gas and coal by 2020.

The military’s drive to cut dependence on oil, coal and gas goes beyond biofuels. It’s developing wind and solar farms to power U.S. bases and expanding the use of renewables into combat zones such as Afghanistan, where a study last year showed one Marine is killed or wounded for every 50 fuel and water convoys.

Under a 2005 law, federal government facilities must source at least 5 percent of their electricity from renewable sources in 2010-2012, and at least 7.5 percent afterward.

Image via WikipediaPresident Barack Obama on Aug. 16 announced the Navy and Departments of Agriculture and Energy would each plow $170 million over three years into the commercial development of biofuels, with the aim of generating at least as much in private investment. The Navy aims to ramp up its biofuels use to 3 million gallons in 2016 from 900,000 gallons next year.

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10 Mistakes Growing Companies Routinely Make

 Forbes
Martin Zwilling, Contributor
I provide pragmatic advice and services to entrepreneurs and startups.
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9/28/2011 @ 2:04PM |1,936 views

I’ve been advising and mentoring startups and growth companies for years, … for the sake of growth and survival.  When you try new things, you make mistakes, ... Smart companies learn from their own mistakes, but some don’t pay enough attention to other people’s mistakes.  …[Here] are some common mistakes that seem to happen routinely:

1. Wait until your company is up and growing before you formalize it. …The simple answer is to do something, and start simple. In almost every state, you can incorporate as an LLC with a minimal effort, and a cost in the hundred dollar range. This step shows everyone you are serious, and limits your liability on any mistakes. It also forces you to pick a name for your company and put other intellectual property stakes in the ground.  It’s not that hard to change later to a C-Corp.

Image via WikipediaCompany and product naming may also seem simple, but should be a key early effort, because mistakes can be very costly. You may recall the Chevy Nova, a compact car from GM. Pundits in Latino countries quickly pointed out that the name, ‘no va’ means ‘does not go’ in Spanish. Professional advice in this area is highly advised. Cultural and religious implications must be very carefully considered.

2. Rely on informal agreements with partners. You may all be friends, or spouses, today, but things do change quickly in the stress of a growing company. The same principles apply to strategic partners. …

3. Quick to hire and slow to fire. … The message here is that if you don’t know exactly what help you need, you probably won’t get it. … On the other end of the process, don’t hesitate to pull the trigger fast when a new hire isn’t working, but don’t forget to be human and follow all the steps. Carrying a non-performing employee probably triples the costs, since you are paying two people to do the job, and at least one other is de-motivated by the inequity.

4. Only hire people who like you or think like you. …  Look for the thoughtful challenge to your ideas, and practice active listening, when you are selling your vision. … Make it a rule to not fraternize with your employees, and choose your partners wisely.

Image via Wikipedia5. Be super-conservative on your cash needs. Double-check both the money you need before funding, and the size of investor funding requests.  …You should buffer the first by 50%, and the second by 25%. Severe cash flow problems are a big mistake, and may not be recoverable. When you have people and their families depending on you for their paychecks, and you are strapped for money, there certainly won’t be any money for growth. Even if you can find someone willing to help, it may be a very expensive proposition.  Cash is more important than profit.

6. Let your accountants manage the expenses. … In reality, the most important task of a every small company CEO is to review every expense with a miserly hand before the money flows out. Do not delegate this task. … The result of budget and expense overruns is not only lost growth opportunities, but lost credibility and lost support from investors and vendors.

7. Make all the decisions yourself.  …  For a company to grow, the team has to grow, and decisions must be delegated.  …Even early in the startup process, you need someone like-minded but complementary in skills to help you with the startup plans. … Lastly, make good use of your Board Members. One or two “experts” who have “been there and done that” can head off many mistakes and suggest a calm recovery plan for the ones you make.  …

8. Defining the strategy is a one-time process. Assume your initial strategy will be wrong. … Plan for strategy changes by scheduling an adjustment review every month. … Be sure to communicate changes to the team effectively and often, so it doesn’t look like you are making random changes.

9. Let the daily crisis keep you from the “most important” issues. It takes practice and effort to focus on the most important things first. In business, “most important” means time to market, customer service, low cost, and beating your competitors. It also means knowing when to delegate, when to rest, and reserving time for effective communication with your team. If you allow yourself to be driven by the crisis of the moment, you will lose the ability to set priorities and focus on goals. …

10. Ignore the mistakes of others. The biggest mistake of growing companies is failing to learn from the mistakes of others, or even from your own mistakes. … Wise people admit their mistakes easily, and move the focus away from blame management and towards learning. The …reality is that making mistakes is part of every successful growth effort.  … But the one unforgivable mistake you should never make is to repeat a previous mistake. …

I am the Founder and CEO of Startup Professionals, a company that provides services to startup founders around the world. My background includes a 30-year track record as an executive in general management, computer software development, product management, and marketing. I'm now in "give-back mode" as a mentor to startup founders, and an Angel investor. My experience with investors includes roles on the selection committee of two local Angel groups, and working from the other side of the table with several VCs in Silicon Valley. In addition to blogging, I recently released my first book titled “Do You Have What It Takes To Be An Entrepreneur?” You can contact me directly at marty@startupprofessionals.com .
The author is a Forbes contributor. The opinions expressed are those of the writer.

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Negotiating in a Nutshell

Harvey Mackay Blog
by Harvey Mackay

 

Here are some ... rules of the road:

1. Never accept any proposal immediately, no matter how good it sounds.
2. Never negotiate with yourself. ...
3. Don’t raise a bid or lower an offer without first getting a response.
4. Never cut a deal with someone who has to "go back and get the boss’ approval." ...
5. If you can’t say yes, it’s no. Just because a deal can be done, doesn’t mean it should be done. ... 
6. Just because it may look nonnegotiable, doesn’t mean it is. ...
7. Do your homework before you deal. ...
8. Rehearse. Practice. ...
9. Beware the late dealer. ...
10. Be nice, but if you can’t be nice, go away and let someone else do the deal. ...
11. A deal can always be made when both parties see their own benefit in making it.
12. A dream is a bargain no matter what you pay for it. ...
13. Don’t discuss your business where it can be overheard by others. ...
14. Watch the game films. ...
15. No one is going to show you their hole card. ... Clue: Since the given reason is never the real reason, you can eliminate the given reason.
16. Always let the other side talk first. ...Image by bartek.langer via Flickr

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Trash To Cash: Mining Landfills For Energy And Profit

Fast Company

BY Ben Schiller Wed Sep 7, 2011

A Belgian company is working on removing the raw materials from dumps, making both energy and building materials out of them, and then redeveloping the land.


[Image: Flickr user D'arcy Norman]

… Dating from the 1960s, the Remo Milieubeheer landfill at Houthalen-Hechteren is a typical dump full of industrial waste and household garbage--16.5 million tons of it in all.
Hardly the sort of the place to get anyone excited.

Except, that is, Patrick Laevers, director of Group Machiels, the Belgian waste management company that owns the site. Laevers has a 20-year plan to excavate the entire expanse, recycling about 45% of its contents, and converting the rest into electricity.

Eventually, … he hopes to turn the site back to nature. What's more, Laevers thinks Houthalen-Hechteren could be the first of many such projects around the world. “We really believe this concept is the future, and that we can all benefit from it,” he says….

Machiels has formed a joint venture with Advanced Plasma Power, a U.K. energy-to-waste company that converts the non-recyclable residue into a mixture of clean-burning natural gas--which generates electricity for 100,000 homes--and a building material called Plasmarok.

Machiels hopes the scheme, which has cost hundreds of millions of dollars, will be fully operational in 2014….

Rolf Stein, CEO of Advanced Plasma Power, says “the mind boggles at the potential” for landfill mining--and not just for energy and recycling. Several companies with landfill sites near cities are looking to reclaim land for property development, he says. …

The concept of mining landfills has been around for years. In the 1950s, the Israelis took soil enriched with waste and spread it over orchards to improve earth quality of the land. And, in the 1980s, some U.S. states farmed landfill material for use in incinerators.

But it has taken rising energy prices and higher demand for recyclables (notably plastic and metals), to make landfill mining viable for companies like Machiels. That, and government support: A key part of the funding for the Houthalen-Hechteren project is coming from renewable energy credits….

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