July 17, 2017

Crowdfunding 2.0

7/17/2017

Venture capital provides financing to early stage emerging companies with high growth potential in exchange for equity / an ownership stake. The risks VCs take investing in disruptive technologies or business models yield higher returns their limited partners (or investors) require. As these companies grow, they create employment / jobs and the economy prospers. Since beginning of the 20th century, venture capital has been the domain of wealthy individuals and families. A typical LP based in a venture fund would be institutions, pension funds, endowments, family offices, etc. 

However, the 2008 Financial Meltdown led to a liquidity crises for entrepreneurs, companies, LPs, & VCs. Fewer IPOs in the market means no exits for VCs, no returns for LPs, and as a result venture funds were on a decline. No new funds means less startup funding, low employment, and slow economic growth. Thus on April 5, 2012, President Obama signed, The Jumpstart Our Business Startups Act (the JOBS Act),  which enables crowdfunding for “accredited” Americans. An accredited investor is an individual with an income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expect to reasonably maintain the same level of income OR have a net worth exceeding $1 million, either individually or jointly with his or her spouse, excluding the primary residence, qualifies as an accredited investor. For an Entity, any trust, with total assets in excess of $5 million qualifies. 

Crowdfunding is a practice of funding a project or venture by raising contributions from a large number of people, typically via the Internet. The market is flooded with various types of crowdfunding options like donation, reward, lending, equity, royalty, and even hybrid versions. The two most popular types of crowdfunding methods are reward and equity. For rewards based crowdfunding, entrepreneurs pre-sell a product or service to launch a business, and some times even in return for gifts or thank you notes. For equity crowdfunding, the backer receives share of a company, usually in exchange of the money pledged. In case of NIN.VC, it would be limited partner interest in the NIN Ventures Technology (QP) Fund.

While the Obama Administration achieved success with the JOBS Act by creating jobs for the Economy, it also did a disservice to the people of United States by encouraging crowdfunding in companies directly, which exposed them to a high degree of risk with such an asset. With the traditional venture capital investment process, we were all indirectly invested in a venture capital fund via a pension fund or institution. Those pension funds and institutions had a diversified portfolio, on top of that they were investing in the venture funds and not companies. So what is the difference between crowdfunding in a company directly and fund or NIN.VC? 

01. Diversification
A fund or NIN Ventures Technology (QP) Fund makes multiple investments in companies in different sectors (i.e. 3D Printing, Cloud Computing, Education Software, etc.) during Series A and / or B financing, this strategy helps diversify the fund’s portfolio, which is not the case when one invests in a company directly. Think of it as investing in a Mutual Fund vs. Stock.

02. High Risk
Given it’s diverse portfolio the fund reduces it’s risk, where as direct investing in a company exposes that investment to higher degree of risk, an appropriate analogy would be to put all your eggs in one basket. A logical follow up argument would be, what if one makes multiple direct investments in companies of their choice using a Crowdfunding portal over investing in a fund? Given 90% of the startups fail, even if one invests in several companies via a Crowdfunding portal, it becomes solely a numbers game i.e. Quantity over Quality. On the other hand the fund management invests in an Entrepreneur because Entrepreneurs build companies and not the other way round. We (NIN.VC or any venture fund) not only provide adequate financing (including follow up financing rounds and access to our syndicate partners), but also lend our domain expertise and network of partners to help companies with recruitment, PR and marketing, and a viable exit strategy. 

03. Professional Management

Direct investing in a company requires time, expertise, due diligence, constant follow up and / or monitoring. On the other hand NIN.VC acts like a financial advisor and works for the investor and in the fund’s best interest. The fund also provides quarterly audited financial statements to the investor on the progress at the fund.

04. Board Representation

A $1,000 direct investment in a company using a Crowdfunding portal does not give an individual enough rights, while a venture fund or NIN.VC takes board seat on all their investments. Thus we are in the loop with the company management when it comes to keeping tabs on the progress at the company and is in a position to help / make suggestions on several occasions, gauge and be a part of the valuation process when it comes to addressing dilution and follow up financing rounds. 

Currently majority of crowdfunding investors are pouring their money investing in companies exposing themselves and the American Economy to a high degree of risk, with a 90% start up failure rate. And since 2014 the crowdfunding industry has grown from $16 billion to an estimated $34 billion in 2015 and is doubling or more every year, and according to the World Bank estimates, crowdfunding will have a global market of $96 billion by 2025 - 1.8 times today’s global venture capital industry. Does replacing smart money with crowdfunding justify its short-term effect or the JOBS created? Did Americans bail out the U.S Economy or are we waiting for another bubble? Watch Ms. Desai's video to learn more about NIN.VC, how we are solving a major flaw with Crowdfunding, what are the benefits of Crowdfunding from both an Investors and Entrepreneurs perspective, investment strategies, importance of diversification, etc.

Given the long-term (5-10 years) venture capital investment cycle, we will probably not see the negative effects of crowdfunding for few more years. However to make matters worse, recently, the SEC approved Title III JOBS Act, Equity Crowdfunding for "non-accredited" investors, which allows any U.S. citizen, regardless of income, to make direct investments via a crowdfunding portal. But, investment in a fund, like ours, is still limited to accredited investors. Are American people given the wrong kind of freedom when it comes to their investment decisions? Given funds are a less riskier asset class compared to crowdfunding in companies, perhaps it’s time to revisit their investor eligibility, alter the definition of an accredited investor, and truly democratize venture capital by make crowdfunding available for everyone...

While there is a major flaw with crowdfunding in general, it does allow investors to direct invest and enjoy direct returns in an investment of their choice, which is not the case with a traditional venture capital investment process. Ignorance is bliss and partial knowledge can be dangerous, thus besides proper investor education, emphasis also needs to be given to FAKE NEWS or media outlets that might be influencing American people. When investing in public company stocks, investors have stock estimates and research reports from various different analysts, which is not the case with private company investing. More startup / technology coverage by media outlets will create investor awareness on this topic. However, journalists must act responsible and should be required to attain a license or certification to cover such stories.

About NIN Ventures (or NIN.VC):
NIN Ventures is a unique and first of its kind crowdfunded technology venture capital fund that invests in series A & B rounds of 3D printing, the 4th industrial revolution, cloud computing, financial services, education software, and other disruptive technology companies. NIN Ventures Technology (QP) Fund is available to "accredited" individuals / firms for a minimum amount of $100,000 using multiple investment options like self-directed IRAs, defined benefit plan, digital currencies (E.g. Bitcoin, Litecoin, Dogecoin), or a regular checking / savings account.

NIN.VC is offering membership interests under the JOBS Act & Regulation D of the US Securities Act of 1933. This offering is being made via general solicitation and general advertising, which is permitted by Rule 506(c) as contemplated by Title II of the JOBS Act. This rule came into effect Sep 23, 2013 and we were the first ones to go live with a website and videos about our fund. NIN Ventures also became the first venture fund to be seen on a billboard, which was followed by in taxi ads and other social media facilitated marketing. Learn more about us on FacebookTwitterLinkedInNIN Ventures TV, etc. 

NIN.VC has been the recipient of several awards including Wealth and Finance International Magazine's "Best Technology Venture Capital Fund - Illinois" for the Alternative Investment Awards, the "Best Crowdfunded Technology Venture Capital Fund - US" for the Fund Awards, and “Leaders in Private Equity – Illinois” by Corporate Vision magazine to name a few. NIN.VC has been featured in VentureBeatChicago TribuneChicago Sun TimesForbesIncWGN's After Hours with Rick KoganNBC Weekend Web with Charlie WojciechowskiBloomberg's Taking StockCrowdfund Insider, and CIO Review to name a few. 








June 23, 2017

Democratize Venture Capital with NIN.VC

6/23/2017

The concept of Entrepreneurship dates back to the 1700s, and has evolved ever since. Most people simply equate it with starting one’s own business. For some, it refers to Venture Capital backed startups and their kin, but economists believe it is much more than that. An Entrepreneur is the one who is willing to bear the risk of a new venture, if there is a significant chance for profit. Entrepreneurship is also a necessary ingredient for stimulating economic growth and employment opportunities in all societies.

Disruptive technology is the first step towards Entrepreneurship. A disruptive technology is an innovation that changes an existing industry and also helps create a new market and value network, displacing an earlier technology or a way of doing business. E.g. NIN.VC, Venture Capital provides financing to early stage emerging companies with high growth potential in exchange for equity / an ownership stake. The risks VCs take investing in disruptive technologies or business models yield higher returns their limited partners (or investors) require. As these companies grow, they create employment and jobs for an Economy in return. The total GDP of United States in 2016 was approximately $18 trillion, out of which 7.5% was technology, which accounted for 6.9 million jobs. 

Since the beginning of the 20th century, Venture Capital has been the domain of wealthy individuals and families. A typical LP base in a venture fund would be institutions, pension funds, endowments, family offices, etc. However, the 2008 Financial Meltdown led to a liquidity crises for Entrepreneurs, Companies, LPs, VCs, and everyone. Fewer IPOs in the market means no exits for VCs, no returns for LPs, and as a result venture funds were on a decline. No new funds means less startup funding, low employment, and slow economic growth. Thus on April 5, 2012, President Obama signed, The Jumpstart Our Business Startups Act (the JOBS Act), which enables Crowdfunding for all Americans; and that's how NIN Ventures (or NIN.VC) came into existence. 

Crowdfunding is a practice of funding a project or venture by raising contributions from a large number of people, typically via the Internet. Since 2014 the crowdfunding industry has grown from $16 billion to an estimated $34 billion in 2015 and is doubling or more every year, and according to the World Bank estimates, crowdfunding will have a global market of $96 billion by 2025 - 1.8 times today’s global Venture Capital industry. Crowdfunding is spread across several types of funding models including rewards, donation, equity, and debt / lending. The two most popular types of Crowdfunding methods are Reward and Equity. For rewards based Crowdfunding, entrepreneurs pre-sell a product or service to launch a business, and some times even in return for gifts or thank you notes. For equity Crowdfunding, the backer receives share of a company, usually in exchange of the money pledged. For NIN Ventures (or NIN.VC), it would be limited partner interest in the NIN Ventures Technology (QP) Fund. 

However, there is a major flaw with Crowdfunding in general; and that is what NIN.VC is solving. 
"I come from an Entrepreneurial family so I can speak on their behalf. Entrepreneurs are brave and courageous bunch that are determined to change the way an existing industry functions. On that journey they need lot more than just financing. They need guidance or domain expertise, help with PR/marketing, recruiting, viable exit strategy, more often follow up financing, etc., which Crowdfunding portals are not able to support.

On the other hand Crowdfunding exposed investors to a whole new asset class, which the normal population never had the knowledge or expertise to invest in. About 99% of startups fail, on top of that low minimum investments like $1,000 does not give them a say or a board seat, putting investors at high degree of risk.

At NIN.VC we solved all of those issues. NIN.VC provides diversification, we take board seat on all our investments and lend the necessary support that an Entrepreneur needs to build a business, like they would get at a traditional Venture Capital fund. And are also in a position to gauge and be a part of the valuation process when it comes to addressing dilution and follow up financing rounds. However, the most IMPORTANT part that investors cares about is the ability to direct invest and enjoy direct returns, which is not the case with a traditional venture capital fund."

NIN.VC is a Crowdfunded Technology Venture Capital firm that is offering membership interests under the JOBS Act & Regulation D of the US Securities Act of 1933. NIN.VC is a unique and first of its kind attempt to bring Venture Capital retail and give people the freedom to directly invest in a fund with an amount of their choice, which also leads to a better financial reward system. This offering is being made via general solicitation and general advertising, which is permitted by Rule 506(c) as contemplated by Title II of the JOBS Act. This rule came into effect Sep 23, 2013 and we were the first ones to go live with a website and videos about our fund. NIN Ventures also became the first venture fund to be seen on a billboard, which was followed by in taxi ads and other social media facilitated marketing. Learn more about us on FacebookTwitterLinkedInNIN Ventures TV, etc. 

NIN.VC invests in series A & B rounds of 3D printing, the 4th industrial revolution, cloud computing, financial services, education software, and other disruptive technology companies. During the postwar period, recessions and recoveries, were mostly matters of business cycles. When demand recovered, GDP growth resumed, and employers hired again. But for the past two decades, this pattern has been broken. Innovation and investing in new technologies and startups is the solution to job creation. Here are the top few technology companies and their employment data to gage their impact on the Economy:


With NIN.VC, we would like to truly democratize venture capital. Most people have a traditional portfolio (i.e. stocks, bonds, and money market), but NIN Ventures Technology (QP) Fund is an opportunity for "accredited" individuals / firms to invest in venture capital for a minimum amount of $100,000 using multiple investment options like self-directed IRAs, defined benefit plan, digital currencies (E.g. Bitcoin, Litecoin, Dogecoin), or a regular checking / savings account. An accredited investor is an individual with an income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expect to reasonably maintain the same level of income OR have a net worth exceeding $1 million, either individually or jointly with his or her spouse, excluding the primary residence, qualifies as an accredited investor. For an Entity, any trust, with total assets in excess of $5 million qualifies.

Recently, the SEC approved Title III JOBS Act, Equity Crowdfunding for non-accredited investors, which allows any U.S. citizen, regardless of income, to make direct investments via a Crowdfunding portal. However, investment in a fund like ours is still limited to accredited investors. Given funds are a less riskier asset class compared to Crowdfunding in companies, perhaps it’s time to revisit their investor eligibility, alter the definition of an accredited investor, and make Crowdfunding available for everyone.

About Ms. Nin Desai: 
Ms. Desai heads NIN.VC, a Crowdfunded Technology Venture Capital firm. Her experience spans all facets of mergers and acquisitions, and corporate finance including public offerings and private placements from private equity to investment banking and investment management. Her corporate finance transactions include RACK, LOOP, LQDT, DBTK, AMIS, SLRY, VOCS, OWW and others. Her M&A deal sheet includes the sale of Financial Profiles to EISI, Buyseasons to Liberty Media, sale of Sircon to Vertafore, and others. She is a Microsoft Certified Systems Engineer (MCSE) and has a technical diploma in E-commerce by IBM, holds Series 7 and 63 licenses from NASD. She holds an B.B.A and M.B.A in Finance / International Business from Loyola University of Chicago, and most recently attended leadership program in Private Equity and Venture Capital at Harvard Business School. 


Ms. Desai has been awarded 2015 CEO Of The Year – Illinois, for innovation and contribution to the Venture Capital & Private Equity industry by Aquisition International magazine and Private Equity Fund Manager to Watch for 2017 by Corporate America. NIN.VC has been the recipient of several awards including Wealth and Finance International Magazine's "Best Technology Venture Capital Fund - Illinois" for the Alternative Investment Awards, the "Best Crowdfunded Technology Venture Capital Fund - US" for the Fund Awards, and “Leaders in Private Equity – Illinois” by Corporate Vision magazine to name a few. 

Ms. Desai also chairs the Harvard Business School Private Equity and Venture Capital Group of Chicago and is a member of Women's Association of Venture and Equity (WAVE). She also sits on the Illinois Venture Capital Association (IVCA) Legislative/IVCA PAC Board and Events Committee. She enjoys golf and piloting light aircraft in her spare time.