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Capping it all off: After Equity Crowdfunding

Posted by AGORACOM-JC at 10:56 AM on Friday, June 17th, 2016

Every entrepreneur today is thinking of ways to manage their company from a sales and accounting perspective. Of equal importance is corporate recordkeeping, an aspect of business management that’s often overlooked – to a company’s detriment.

One of the crucial corporate records that needs more attention is the capitalization table, or cap table as it’s frequently called. Microsoft Excel has been the leading platform for cap table management for years. However, it’s becoming increasingly evident that old solutions like these are unable to match the pace of modern entrepreneurs and their recordkeeping needs.

What is a cap table?

Simply put, a cap table is a breakdown of a company’s equity ownership among shareholders. It reflects the percentage of equity ownership for founders and investors, as well as changes to equity value and dilution over time.

That’s just the simplified version. A cap table is much more than a list of transactions; it includes legal documents, sales, stock issuances, transfers, debt-to-equity conversions, and many other data. Sometimes, the term is applied broadly, and used to describe all records pertaining to company stakeholders: in other words, a lot of vital information.

How should the contemporary company track all of this crucial data?

How to manage a cap table in the Twenty-First Century


As a CFO I’m often responsible for the cap table management of the companies I work with. As a custodian I have a responsibility to make sure the information contained in the cap table is up-to-date, secure, and accessible to relevant parties.

Now, there’s a great tool that not only manages my cap table but also connects me to all the important documents in my company minute book. This tool offers an efficient management system that helps me keep track of all company shareholders in one secure environment. As my company grows, it saves me time and money that I would have wasted filling out paperwork, making hard copies, and sending digital files through unsafe email servers.

KoreConX is a FREE corporate management tool designed to facilitate the process of raising equity capital by bridging the communication gap between businesses and shareholders in a secure and transparent way. With KoreConX, I can release the contents of my cap table to shareholders looking to access their private holdings from investments. I can grant them access to relevant company reports and other information as needed.

The Four Cs

At the heart of it all, a cap table should be clear, comprehensive, current, and compliant. Clear to all those who need it for reference; comprehensive in its contents; current as of the latest development; legally compliant.

The great thing about KoreConX is that it is an all-in-one solution that ensures my cap table checks all the four Cs.

Clear: I can keep everyone on the same page without compromising the integrity of my records. With KoreConX, I can share as little or as much as I like, preventing staff from being bombarded with information not directly relevant to them and restricting access to confidential documents.

Comprehensive: Without a storage limit, I can store all my detailed information with KoreConX and work with collaborators in a secure digital environment.

Current: I can update the cap table virtually without having to make photocopies of the latest version, or without having to send everyone a revised spreadsheet through a risky email system.

Compliant: By law, members of the company’s Board of Directors must be able to access the minute book. KoreConX allows all members of the board to see the contents of the minute book. It also offers integrated tools to schedule meetings and assign tasks. The platform also saves time and money by reducing excess legal fees by taking a proactive approach to record management.

KoreConX is truly a tool for the modern entrepreneur. As companies of all sizes evolve and adapt to the pace of business today, our recordkeeping and information-sharing technologies should always be one step ahead.

The Double-D #crowdfunding

Posted by AGORACOM-JC at 1:50 PM on Thursday, June 2nd, 2016

Get your mind out of the gutter!Now, when you first saw the title, you asked yourself what business has to do with anything relating to double-Ds – of any kind.

We’re talking about Due Diligence. Sexy, isn’t it? Due diligence is a topic that gets a lot of people talking and writing, but they don’t make it interesting. It loses its sex appeal.The problem is that when these articles appear, most entrepreneurs turn their head and pay no attention or often comment back saying my lawyer does it all.The future of their company depends on following due diligence best practices, and yet they’ve washed their hands of it.They lose sight of the need to get naked for money.


This all changed on 28 October 2015 for companies, investors, and equity portals around the globe whether they know it or not. The SEC caught one American company committing fraud through equity crowdfunding, costing their shareholders almost $2 million in misspent funds, and it isn’t about to let them off easy.

We had our first fallout because no due diligence was done.So what does this mean for companies, investors, portals, and anyone else that’s part of the ecosystem?For one, it means that the level of scrutiny has to increase, for the good of the industry.The fraud could have been detected had Ascenergy gone to an equity crowdfunding portal that was operated by a FINRA broker dealer.Instead, the fraud occurred through bulletin board style portals such as AngelList, EquityNet and Crowdfunder.These boards do no due diligence of their own, and all of the risk around picking a legitimate company with a real opportunity is shifted to the investor, and the responsibility to ensure that they’re staying compliant and transparent.

Equity portals will need to emphasize to investors the high level of rigorous due diligence they perform on companies before they’re listed on their platform regardless if you are doing Title II, Title III and Title IV.They’ll need to reassure their investors that their companies can, to the best of anyone’s knowledge, be trusted, and educate them on the steps they take to vet opportunities.Building trust will be critical for equity portals.An investor that buys into a fraudulent deal on an equity crowdfunding portal isn’t very likely to do so again.

Each equity portal will employ different levels of due diligence, and may utilize third party companies like CrowdCheck to provide them with a FINRA compliant due diligence report which they can then combine with their own due diligence.Portals such as OfferBoard, StartEngine, BankRoll.Ventures, MicroVentures, CircleUP, and ASMX pride themselves on the rigorous due diligence they perform in companies.

For companies that thought that simply having a powerdeck and termsheet was going to be enough, all I can say is that you’re not going to be successful in having your company listed on equity portals.Companies will need to make sure they fully understand all the due diligence requirements they need to meet.Today, there are tools such as KoreConX that help companies prepare their documents so they can share with equity portals to conduct due diligence. It helps them stay transparent with their shareholders, and effectively get naked in front of the crowd for money.

Title III in now live, and many entrepreneurs are wondering how rigorous due diligence will be on their companies.They wonder if the process will be simplified, or if the requirements will change in any way.The answer is simple: due diligence isn’t going away and the market will be crowded.Portals will only take companies that meet and go beyond the basic due diligence requirements of Title III.

The due diligence requirements for Title II and Title III are very different.Title II requires more detailed information from the company than Title III does.Now, I caution all entrepreneurs, yes due diligence requirements are reduced under Title III, but equity crowdfunding portals operating under Title III can, at their discretion, decide not to accept you if they don’t feel you met their requirements.My recommendation is to plan your due diligence as if you were doing a Title II raise, as you will need to stand out in the crowd.

It takes a pretty big leap of faith to hand over so much money to a company you’ve only just heard of, with a team you’ve never met, so portals and companies need to work in concert to create investor confidence. Due diligence is in place to protect the interests of the investor, and make no mistake that doing so is essential to ensuring the sector succeeds.It’s an inextricable part of the marketing efforts of everyone involved.

I’ve written on this in the past, advising a paradigm shift in investor relations.Now we’re doing the same for due diligence.This is your chance to lay it all out there, to make your best argument for your company, your portal, and your future success, and create advocates out of strangers.

Sexy Finance: How I came around to Fintech Compliance

Posted by AGORACOM-JC at 5:10 PM on Thursday, May 5th, 2016

By: Darcy Brooks

Director Marketing and Communications | KoreConX

I’m not a natural fit for finance.

I never liked math, thought banks were boring places to work, slow-moving and conservative institutions, and while money may rule the world, I had little interest in it.  But much has changed for me and for finance over the last few years.  We’ve come together, somehow.

This week, I attended the FundIt Crowdfunding Conference in Las Vegas, to learn about regulatory compliance in equity crowdfunding, of all things, and I saw first hand how old-world financial regulations give way to, control, and accommodate technology, and how they don’t.

We were there to discuss Title III, Title IV crowdfunding rules, marketing, compliance, and technology, and everyone who’s currently anyone in the industry was there.  Douglas Ellenoff and Richard Swart each delivered keynote addresses, talking about how it all came about, where we are as an industry, and how far we still have to go.  Our CEO, Oscar Jofre, sat on two panels, alongside iDisclose’s Georgia Quinn.

A conference hall full of industry experts left galvanized and far better informed, but we missed one key player: the equity crowdfunding portals that will need to put these regulations into regular practice, and plan to operate under Title III Crowdfunding.  The rules are confusing even to those that have been around the JOBS Act for years, and if the industry’s newest players aren’t equipped to get it right, it means big scrutiny, and even curtailed growth for the equity crowdfunding industry as a whole. So where are they?

I think the entrepreneurial mindset plays a role. Being willing to break and bend the rules has been a mainstay of successful entrepreneurs.  Consider Uber, AirBnB and the complete paradigm shifts in finance that gave birth to equity crowdfunding, peer-to-peer lending and the like.  Technology changed regulation.  So how does an industry founded on rule-changing ensure that everyone is walking in lock step, and that no issues arise from a lack of awareness of exactly what’s required?

FundIt Crowdfunding Conference was a large step in the right direction, and I have to applaud the organizers for their foresight, but more initiatives in a similar vein are clearly needed.  We need to make compliance sexy, or at the very least, clear and easy.  This is no small feat (even the regulators were a little confused at times).

This was the first of what I think will be many events to focus on “crowd diligence”, and the burden of education is a heavy one.  It was extremely timely.  When Title III goes live May 16th, the industry needs to have its marching orders straight.

I think we need to treat this first discussion of “crowd diligence” as the first vibrations in what has to be a ripple effect.

I came by an interest in fintech and equity crowdfunding through immersion – I jumped off the deep end into subject matter I knew little about, and resurfaced with hope for the success and the potential of the big ideas of the future.  I’m an idealist, and alternative finance sounded so empowering.  It meant a paradigm shift in how we think about money.  I’m constantly reminded of something a professor of mine once said, that “money is the most concentrated form of human energy”.  Pure motive force.  I’ve been fascinated by startup culture from the beginning, and the equity crowdfunding reeked of immense potential.

This is what made finance sexy to me.  It may be the most truly democratic idea I’ve ever come across.  After all, money is money no matter where it came from, and we’re all voting with it.

Regulations are never perfect, but they are there to keep things moving forward and minimize the bumps in the road.  I can’t speak to where these new market entrants are coming from – business, finance, entrepreneurship, or some combination thereof – but I think we’ve taken steps towards becoming evangelists for both sides of the equity crowdfunding coin; innovation and regulation.

We’ve had the first industry “crowd diligence” conversation, but we need to keep talking.



Fintech: The New World Order

Posted by AGORACOM-JC at 11:12 AM on Thursday, May 5th, 2016

Like most of you today, I spend a lot of time reading about fintech. You can get massive amounts of news reports and companies talking about fintech, saying that they’re part of Fintech.  But what does “fintech” really mean?

Fintech is not new, but it has been given a facelift. Most would say that financial technology (or FinTech) has been around for a long time, and they’re correct.  It isn’t new per se, but it is evolving faster now than ever, and changing how business is done. What makes Fintech so disruptive that it’s affecting all the institutional pillars in one strike.  The pillars (Banking, Capital Markets, Private Equity, Insurance, Legal,  Regulatory), all of which are long standing institutional pillars in our business society that had been static – and stagnant– for too long.

Like many new sectors, in order to make sense of it and what it’s doing, you need to break it down into  all the component parts  to see how each affects what we’re doing or working on.

Fintech is a financial revolution, or as many call it, an EVOLUTION.

Fintech is for either B2C business to consumer financial disruptions which there are many changes occurring industry-wide that benefit the consumer.  While most are at the banking level of disruption, insurance and regtech are not far behind.

Let’s take a minute to talk about B2B (Business to Business) fintech.   B2B Fintech is focusing on altering the institutional pillars that affect how a business uses them to acquire the services they offer or capital.

Fintech B2B disruption has a number of segments that are being disrupted simultaneously, causing issues for long-standing institutional pillars of banking, insurance, legal, and regulatory.

Let’s look at all the five segments of B2B Fintech

Alternative Finance (Altfi)

Capital raising was ripe for change the collapse of the financial markets in the USA and worldwide became the final straw that opened this market up.  Today, we have alternative finance portals for debt or equity that help businesses access capital directly from individual investors, bypassing banks, venture capitalist, private equity groups, and the like.

Insurance (InsurTech)

This is one of the oldest established financial industries,  and for decades companies involved in it have done little to innovate, and the market has stayed fairly stagnant.  Today, we have a number of new players that have left those institutions to set up the new Fintech Insurance companies.  They’re making change a reality, and at the end of it all, it’s the company that  ultimately benefits. For decades, they paid the high cost of old institutional ways of operating and servicing their clients, but no longer.


Many in the legal sector say that you can’t disrupt the legal business. This statement is partly true, and false.  Yes, it’s true we still need lawyers with the expertise to provide us advice in operating our companies.  But technology is changing how lawyers work and deliver those services to clients.  No longer does a business need to pay high costs to have documents created, or to create entities.  Now don’t make the mistake of assuming that this replaces the lawyer, which it does not.  The lawyers that embrace Fintech Legal understand their profession is going through a massive evolution, and that adapting means staying competitive, and driving value for their clients.


Of all the segments that felt the hit of Fintech, the one that was hit the hardest was probably banking.  The banking sector in the early days of Fintech made the mistake of dismissing these early entrants as nothing more than fly by night.  Now, looking back we know these “fly by nights” are now the norm.  Banks are feeling the attack on all fronts, from consumers, business, wealth management, and every other subsector.


This final segment is crucial for Fintech B2B to become explosive.  The underlying issue with all the segments in Fintech is that the traditional pillars all rely on regulatory bodies to protect them.  The global marketplace has regulated companies for years for licensing, capital raising, etc.  RegTech is changing how we can open accounts with ID Verification, where money comes from with AML, how we validate companies,and  conduct backgrounds checks, all in realtime and in a cost effective manner.  There are many areas in regtech that are evolving, making it easier for businesses to reach their goals.

As you can see in the image, all five segments are changing because of one constant, the business.  Bringing all the five segments together requires a platform that aligns itself with the businesses at heart of it all, one that can bring a company through all five processes in a seamless manner, allowing Fintech to grow exponentially.



Standalone disruptions are not going to work if we don’t also include the the second “B” in B2B.  To date, fintech companies involved in B2B have only enacted tech disruption from the institutional segment perspective, and put little efforts in solving the overall business problem.

These innovators are doing a great job, but as I said, for this to really explode on a global scale the second “B” must also be considered, and in fact, should be front of mind.

Let’s look at alternative finance in terms of equity crowdfunding or debt: each have a common goal to help companies access capital more efficient from the crowd.  Equity Crowdfunding portals are in the business of bringing in companies, attracting investors, and performing due diligence, KYP, KYC, AML, ID Verification, Payments, and ensuring all closing docs are online.

Now what most don’t know is that before companies are listed, the portal’s professional compliance staff go to work. Their entire job is to review all the due diligence information provided by the company to the portal prior to being listed, and approve or decline.  The amount of Information that the portals need is extensive, as they need to make sure there will be no issues with their securities regulators, that they’re working to prevent fraud, and  also building credibility with their investor base.

Many feel that one day this requirement is going to be removed, and I can assure you it won’t be.  The operators of the portals are either professionals from the investment sector, or from private equity, and they’re not going to take that risk themselves, or hurt their investor base. That base relies on them doing all the heavy lifting before the deal gets posted on their platform.

So now we see how portals are changing the way that businesses access capital,  and what they need.  It isn’t an easy process for the portals.  It’s easy to see the ongoing issues portals are facing with on-boarding and post-transaction compliance related to the businesses they are helping.

Nobody had ever brought all five segments together in one place before KoreConX, allowing companies to access the full range of financial innovation  in a cost-efficient manner until KoreConX.

KoreConX works with all 5 segments to  create a seamlessly integrated ecosystem that can grow faster, reducing the friction in all five segments in B2B fintech.

The fintech sector is evolving rapidly, and the norm is no longer acceptable.  For those in Fintech, we have much work to do to truly and permanently alter current institutional pillars.  They haven’t made any progress in B2B and are now scrambling and acquiring their way into the market.  Players like Alphabet, Alibaba, and Microsoft are already making their presence felt, and many more are coming.