This week, Stephen Ibaraki has an exclusive interview with Ruth Hedges.
The JOBS act was signed into law on 5 April 2012 and supported by overwhelming bipartisan support. Ms. Hedges has been active in pioneering this new industry and from the beginning of 2010 helping the Startup Exemption team to move the bill's passage through Congress. She has since been building awareness through her global event in Las Vegas, http://www.crowdfundingroadmap.com/bootcamp, and development of best practices, compliant technology and educational material.
As a leader and industry expert Ms. Hedges has been interviewed or quoted in over 35 major publications.
Ms. Hedges was also a Founding board member in 2012 of the Governance committee for the Crowdfunding Professional Association Organizing (CFPA), and also a Founding Board member of the CrowdFund Intermediary Regulatory Advocates (CFIRA).
Previously, Ms. Hedges was featured in the Chronicle of Philanthropy as well as the New York Times, the LA Times and People magazine for her work with Oxfam America and the Hollywood Hunger Banquets. She was featured on ABC's Home Show, and the Financial News Network produced a two-part series on Ms. Hedges for their show "American Entrepreneur". She was invited to fill a cabinet seat on the Second Century Campaign board which raised over 16 million dollars to build the new Union Rescue Mission. She is the recipient of the Certificate of Appreciation from the City of Los Angeles for that work.
The latest blog on the interview can be found in the IT Managers Connection (IMC) forum where you can provide your comments in an interactive dialogue.
Interview Time Index (MM:SS) and Topic
|:00:36:|| ||Can you profile your prior top roles and useful lessons from those roles?|
"..... I started off very young at 19 years old with what I thought was going to be a small little catering business; it turned out to be quite a successful one for over 18 years....It was during the dot-com days in the late 1990s I lost my kitchen and I wasn't able to cater anymore so I was looking to re-invent myself. I found there was this new industry being developed around the internet. All these dot-com companies needed to set up a business structure around their internet business and didn't know anything about business development, so I decided to open up an incubator....After the dot-com was over I realized that I didn't want to be a service provider anymore so I thought I'm going to invent something but didn't know what it was going to be....I had this idea to reinvent this business plan (that I absolutely hated writing), into more of a product like TurboTax which at the time was very innovative, so I wanted to create a standardized form that everyone could fill out and looked the same each and every time....That essentially is how this all started, where fundingroadmap.com came from and led me down this path...."
|:04:11:|| ||Thatís a very interesting background that you have. Do you have any additional past experiences that you want to share that led to your work with funding and crowdfunding?|
"....In development, this product went through lots of transformations because of the technology....We eventually put it on the Cloud and in 2008 and 2009 there was a great recession and a lot of my customers weren't able to go to a bank (which it was originally intended for), or talk to an angel or VC and present it to them to be able to raise capital. I started to look at the other options out there and realized that if you were not an accredited investor you really could not share your money with these startups. In the United States there is a 80 year old securities law from 1933 that we would have to get removed from the books to be able to allow anybody with any amount of wealth to be able to invest in startups....We went on to write this framework for what would eventually be passed into law in the JOBS Act of April 5, 2012 called Title iii the Crowdfunding Bill. I'm very proud of those efforts and it's going to change the way entrepreneurs raise capital and launch businesses and inspire their fans, followers and friends on the internet who want to do business with them...."
|:06:57:|| ||Can you describe the kind of support you had?|
"....We had 417 congressmen say yes and 17 said no. We had 2/3 of the Senate. The Bill got passed. It was pretty quick considering from the moment we had this idea to the time the Bill was passed was a little bit more than a year. They understood that banks had been paralyzed, they literally shut down....People were going out of business because of it so we needed to give them some other options to be able to go out and raise capital and what better place than their customers....That's essentially what crowdfunding does, it opens up your ability to raise capital from anybody...."
|:08:55:|| ||Please overview globalcrowdfundingday.com, crowdfundingcollege, crowdfundingroadmap and fundingroadmap and why people should get involved?|
"....I looked at what I had built in the fundingroadmap and realized that if I made some changes it would be compliant with the JOBS Act and a planning tool in a reporting system for this new type of securities offering. We went back into design programming and created the crowdfundingroadmap which is a crowdfund compliant product to help entrepreneurs prepare the documentation and the reporting of not only their business plan and the due diligence information, but also how you actually prepare a crowdfund campaign....I wanted to create a way that we could all share in this experience and I came up with this idea of http://www.globalcrowdfundingday.com/. For 24 hours we are compelling the public to go to a crowdfunding website and to make a contribution to somebody's campaign. It could be as small as $1 or $2, it doesn't matter the amount, it's the idea that we're all sharing in what I refer to as 'the best of our humanity'. Because the way crowdfunding works today there is really nothing in it for you as much as you sharing your money with an idea that resonates with you, that you feel passionate about supporting. It's every April 5th, for 24 hours for Global Crowdfunding Day....You also asked me about Crowdfundingcollege. Once we saw how complicated the rules were for Title ii and Title iii of the JOBS Act, my business partner Scott Purcell and I decided to put together some curriculum and create a Certified Crowdfunding Professional program here in Las Vegas where people can learn the entire rules and regulations and process to be able to sell securities and be compliant with the JOBS Act....."
|:17:40:|| ||Ruth explains the difference between JOBS Act Title ii and Title iii.|
"....There are limitations on the amount of money that you can raise when you are dealing with the general public in the United States. There are 300 million Americans and they can invest small amounts of money for stock using the Title iii offering. There's a cap of a million dollars and most Americans who earn less than $100,000 a year can only invest between $2000 and 5% of their income. The Title ii is for accredited investors (those are people who have a net worth of more than a million dollars). Title ii and iii offerings are only open to US citizens in the United States...."
|:19:21:|| ||You talked about the different initiatives that you pioneered, what is the revenue model for each one of them?|
"....Crowdfundingroadmap is a subscription and it is 99 dollars a year. We built this thing called a hatchery which is actually a place where you can advertise your offering once you've completed all this virtual paperwork. You can then list inside of this hatchery your offering to funding portal owners and broker dealers who are the only people legally allowed to help you execute that offering, and they are going to be looking for dealflow and they are going to be looking to find customers to help facilitate the sale of the securities. What we're trying to do on crowdfundingroadmap.com is to create a pipeline of crowdfund-compliant ready entrepreneurs with dealflow that could be easily unboarded onto the funding portal or with the broker-dealer and immediately start the campaigning....Global Crowdfunding Day is free and it doesn't have anything to do with revenue. It's an initiative to compel and share an idea universally that eventually will be helping all of the people who are doing crowdfunding, however those donations are made....The Crowdfunding College is $699 and there is a very rigorous exam that you have to take and pass 125 questions to be able to get certified...."
|:22:32:|| ||Now let's say that I'm somebody in the UK (of course the UK has its own platforms), but I'm really excited about what Ruth has created here and I want to try to launch something in the US. Can somebody from the UK or Germany (for example) use crowdfundingroadmap?|
"....If you are in another country and you want to introduce your idea to US investors you can absolutely use the crowdfundingroadmap. Now what you can't do is launch a Title iii crowdfunding campaign unless you are a US citizen. You can raise capital the old fashioned way using this platform and talk to accredited investors in the United States, but you can't talk to 300 million Americans on a funding portal using Title iii unless you are a US company and you get money from US citizens...."
|:23:33:|| ||You already talked about the JOBS Act, but is there anything more that you'd like to add? |
"....What people don't understand is that you will eventually have a large group of investors that you then have to network and communicate with and continuously share updates about the progress of your company. Legally in the United States you will be required to provide updates, but just collaboration for example, you will want to share the progress of your company with your investors and the crowdfundingroadmap is an amazing tool to help you do that, because it can continuously update and keep it current....The other thing is that when you are competing during the crowdfunding process you are on a website where there could be thousands of other offerings.....You have to absolutely nail your presentation and you have to be able to go into a chat room and answer their questions about your business and the shares of stock that you're selling. This requires a higher level of understanding and I think the cream will rise and the ones that are really great entrepreneurs and have their act together will be very successful using this....Those are the kind of things that crowdfundingroadmap can help you prepare to do...."
|:27:22:|| ||Can you tell us more about the first course (http://crowdU.com) on equity based crowdfunding?|
"..... Itís a day long class and we are going to hit the information fast and quickly because there is a lot to go through. People will be trained in the history of Wall Street, the fundamentals of securities and regulations, the changes and challenges that the JOBS Act brings, how businesses can raise money via this new private placement exemption, there's debt and equity, the responsibilities of the brokers and funding portals, how investors should analyze opportunity, and the ongoing regulatory compliance....."
|:28:50:|| ||Is this course going to available online or what are the mechanics or logistics of it?|
"....We have a classroom here in Las Vegas and we are going to be teaching from that classroom but we are also going to be recording the class and people will be able to watch it online at their leisure. Then they will have the option of logging into the exam anywhere in the world and taking the test as well (at their own pace). It will be a timed test and if they don't pass, they will have the opportunity to take it again and different questions will come up each time they take the test..."
|:29:32:|| ||Do you see wider support for the certification?|
"....There are tens of thousands of business development offices of employees, they work in every city and town in the United States where the public is compelled to work with these people for advice on how to build a business and financing. Virtually none of these people know anything about what I just described. Even though we had to go to Congress to get this Bill passed they did not mandate in their cities and towns any kind of requirements for their government employees to be educated at this level in Title ii and Title iii of the JOBS Act, so this is going to be in very high demand once we launch it by all of these organizations...."
|:30:51:|| ||How will your work evolve in 5 years?|
"....I put on the largest crowdfunding conference in the world. It's October 23 Ė 25, 2014 in Las Vegas and this is my third year doing the conference. That conference in 5 years I hope to be filled with a roomful of successful entrepreneurs who have used these new securities offerings to successfully raise the money and that they are there with their investors and we're all celebrating the success of this. This is really a transformational democratization in capital and never been done before anywhere in the world and I think it's going to change the way we create jobs and we launch businesses. That's really what I'd love to see, as well as obviously my businesses being very successful...."
|:32:48:|| ||What's the best way to get connected with this conference you are holding?|
"....You can go to crowdfundingroadmap.com/bootcamp and register and we're on Eventbrite as well. We already have some very exciting people lined up which we will be making public soon....We've now established ourselves as a pre-eminent convention anywhere in the world and we are looking to make this the largest global convention where people from all over the world can come to this event and really learn from these experts...."
|:34:55:|| ||What are your added views for crowdfunding?|
"....What most people don't understand is that this has a lot to do with what we call social capital. Social capital is your wealth essentially on the internet. How many friends, fans and followers you have in Twitter, Facebook and LinkedIn, Instagram and Pinterest and all these places where people are socializing; these become the way that you raise money....Crowdfunding is the collective effort of a group of people to either donate or invest in a cause or a business and up until we signed the JOBS Act it was illegal to self-exchange stock, securities for any of that money. As soon as the SEC completes the rules in this country you will be able to exchange stock for those funds. But today you can do what's called Reward's Day crowdfunding and that is where you can make a contribution to somebody (maybe they are artistic and a musician and they are looking to put together a prototype of their music or product and they need some seed capital). You can go on a website (there's over 700 crowdfunding websites in the world) and you can find something that resonates with you that you want to support, and you can make a small contribution as little as a few dollars and they will give you what we call a reward..."
|:41:20:|| ||You spoke at the Consumer and Electronics Show (CES) because of your leadership position in this marketplace — crowdfunding was everywhere. Can you comment?|
"....Think of all the products that never see the light of day because they can't access capital — think about all the scientific things. We might have cured cancer by now but we don't know the scientist that was out there struggling with some ideas that he could never get the funding for and now we can change all that. I was very excited to be speaking at the Consumer and Electronics Show and talk about crowdfunding because so many people are still unaware of it, and even though it's starting to become much more well-known it hasn't really started to explode. When you look at social media seven years ago and you look at it today, Facebook has over a billion people on it — that is what is going to happen in crowdfunding.... Last year we hit over 5 billion dollars and the year before with 2.7 billion. Considering there is no public advertising (you don't see commercials about crowdfunding yet, billboards yet, buses yet, full-page ads yet), but you will and when you do it's going to be explosive...."
|:43:53:|| ||Do you believe crowdfunding will supplement traditional funding approaches or be totally disruptive and significantly replace traditional funding approaches?|
"....It's really just disrupting something that wasn't working, it's improving it....Imagine you needed additional capital after you've successfully crowdfunded, and you being able to walk into a bank and say I just presold a 1000 copies of my whatever through crowdfunding. You now have credit, collateral, credibility, proof of concept. You have all kinds of things that you would not have had if you had not experienced crowdfunding, so it's just an added value to every other form of financing — it doesn't take away from those other options that are out there...."
|:45:36:|| ||How do you believe your prior skills contribute to your success as an entrepreneur and leader?|
"....I am a big believer in self-determination and living to the potential of your own uniqueness. I have this saying, 'act as if you already were there'....I'm in the software business. Let's say I was Bill Gates. What is Bill Gates doing today? Whatever Bill Gates is doing, I need (as CEO of my software company), to act just like I was running a billion dollar software company and reach out and network and do the same kinds of things that anybody else would be doing once they've achieved success...."
|:48:53:|| ||What is your global strategy? Do you have global ambitions?|
"....To have a product in the world that is multiple-choice, that's educational, that's consistently the same (a standardized planning tool and reporting system), will make it easy in every country around the world to use this product. It's very inexpensive, we priced it extremely well so that anybody on any budget could use this product....When you are building a business and taking on new partners you have to be able to share your vision, your direction with these people and this is a perfect tool to be able to do that. Obviously we have to translate it if we take it to other countries and we have to make sure that it is compliant with rules and the laws of every country that it goes into, but we absolutely welcome the opportunity to partner with people in other countries who want to bring this technology to their country...."
|:52:06:|| ||Since August 2013, the Chinese central government launched a program for financial market openness. Do you have any comments of what you think this will lead to if there is more openness in their financial markets? |
"....I believe in universal capitalism and everyone having a chance at their dream of how they want to live their life, to be able to pursue their talents, go to work every day doing things that they love and are passionate about. I'm a huge proponent of entrepreneurship, like I said I've been one my entire life. I think being able to access capital from your friends and your family and being able to launch a business and create jobs in your city, town and community is a universal experience that we should all share. One other thing is the localization of crowdfunding....This is a whole new way of creating the infrastructure for localized communities that we want to live in and having equity in those. Obviously you're going to be promoting them so you are going to have a larger group of people out there promoting whatever they happen to own equity in...."
|:55:37:|| ||You were one of the instruments of change in the JOBS Act and that helped initiate that whole process. What are some additional investment (government) policy changes you want to see in the US and in the world?|
"....I think that there is this fear — I don't believe it is a real fear — that somehow the average person in America (this is not specific to America, but I can speak about it from this vantage point), is not smart enough to make a decision with our own money and we need the government to come in and put cap limitations on how we should be able to invest our money. What's ironic about this is that you can go into a casino and you can put as much money as you want on a craps table or in a slot machine and there's no government regulation whatsoever....But for some reason, the government feels that they need to protect you from using the same exact money that you would gamble with and limit how much of that money you can invest in a startup...."
|:58:18:|| ||Because of your position and the leadership you have shown through crowdfunding, your extensive speaking, travels and work experiences, do you have any stories you would like to share (perhaps something amusing, surprising, unexpected, amazing)?|
"....I asked a woman if she had ever heard of crowdfunding and she said, 'No I haven't. Why would anyone want to invest in a cloud?'....She didn't quite get how this works. I really haven't had anything amusing happen, but I have had people be absolutely transformed by this idea. People have sat in the audience and come up to me afterwards, their eyes wide open; the idea of this concept that you can go on a website, put up information about your passion, vision, the business or product you are trying to develop and get off the ground, and talk to a world of potentially 7 billion strangers and convince them to give you their money. It's an incredibly powerful thing and it's being done...."
|:01:01:23:|| ||If you were conducting this interview, what question would you ask, and then what would be your answer?|
"....'How can we create a higher global awareness to crowdfunding?'....You don't see these kinds of conversations on the front pages of local newspapers or general people magazines. You don't see the exciting things that are happening in crowdfunding in a more mainstream way — I want to create a global awareness to this. I want people all over the world to know about crowdfunding, to share in the experience of it either as a contributor funding or as a launcher of a campaign and get access to the capital they need....The flow of capital doesn't flow without the efforts of entrepreneurs so being creative and creating products and services and putting them out in the marketplace and creating jobs — that's how it all works. If we don't do things in every city and town and country to encourage and support that, we'll never grow....It's all about human capital, it's about encouraging the best of our humanity...."
|:01:04:12:|| ||Ruth, with your demanding schedule, we are indeed fortunate to have you come in to do this interview. Thank you for sharing your deep experiences with our audience.|