Editor's Note: Each week I put a crowdfunding industry thought leader in the spotlight and ask them ten questions to inspire and educate. This week it is my pleasure to welcome Victoria Silchenko, Ph.D., creator of the annual Global Entrepreneurship and Alternative Funding Forum.
Victoria Silchenko, Ph.D. is the founder & CEO ofMetropole Capital Group and creator of the annualGlobal Entrepreneurship and Alternative Funding Forum. She is also an adjunct professor at CLU teaching Entrepreneurial Finance.
Victoria is a prominent voice in the entrepreneurial community and is a contributing writer for the Huffington Post on the subjects of crowdfunding, angel investing and venture capital and is an op-ed guest columnist for the Los Angeles Business Journal. In 2013 she was nominated by the Los Angeles Business Journal ino the Women Making A Difference Awards.
She currently serves on the Board of the Los Angeles Venture Association and also chairs Global LAVA group. She is also on the Advisory Boards of The California Stock Xchange, TradeUpFund.com and Marchmont Innovation News. On her spare time, she likes to write her own poems, paint, read philosophy and play piano.
Q: How did you get into crowdfunding and what was it that attracted you to this industry?
As founder and CEO of Metropole Capital Group (www.metropolecapital.com) I advise entrepreneurs who are in search of start-up or growth capital and make sure that their business is investment ready while the financing strategy I offer is sound and feasible.
But over the years, my frustration has been growing at witnessing how unbalanced capital markets were, being geared clearly towards high-tech or e-commerce industries leaving in short supply money for healthcare, educational, retail and other less sexy sectors. I also noticed a notorious gender disparity, confirmed by the statistic that over 98 per cent of venture capital goes to male owned businesses. My personal view of this though is that it is not that VCs don’t like to invest into female owned businesses, it is just that the majority of us women happen to be in the non-tech industries that are not "likeable" by VCs, who are looking primarily for easily scalable businesses with a clear exit strategy.
While looking for solutions, a few years ago I literally googled “crowdfunding” and gradually educated myself on the topic, coming to realize that this is where the future is. And that future is bright.
Q: What’s the most common question people ask you about your job and how do you respond?
I am often asked: “With you handling so many different activities, Victoria, I presume you need to think outside the box?” I always respond “I never even had a box.”
Q: Did you have a mentor or is there someone who inspires you as a leader? How did/do they impact on your career and life?
I’ve been blessed to work with, and befriend, some of the most successful and intelligent people in the word in a very broad range of industries including Dr. Arthur Laffer (former economic adviser for President Reagan), Michael Milken, Larry Namer (co-founder of E! Entertainment TV), David Seidler (Oscar winning screenwriter of “The King’s Speech”), David Traub (producer of “Jobs”) and many others. For some reason I’ve always bonded with people who in some ways were fighters challenging the status quo while trying to bring their own vision to the word.
My personal hero is surely Richard Branson who by the way once said a very wise statement – “money is a poor indicator of success.” But the position to be my official mentor is open – send me your applications! Meanwhile I am learning every day from my amazing colleagues, my team, my friends and just about anyone I meet – including taxi drivers or workers at the dry cleaners. Always ask questions and don’t think you are better than anyone else – that’s the key.
Q: What is the biggest challenge facing crowdfunding as an industry today and what solutions would you suggest?
My biggest disappointment was the fact that the Security and Exchange commission did not move forward with the provision of the JOBS act of 2012 which would allow small businesses to raise up to $1 million annually from the general public. The crowd, for now, can invest only into public markets or mutual funds – while enjoying the passive investments with no impact. And this is when the JOBS act suggested a limit on the amount of money an individual can put into a highly risky private company to 5 per cent of his annual income, if he is making less than $100k, or 10 per cent if his annual income is over $100k.
That’s why I really don’t buy the well-populated argument that the SEC is just trying to protect unsophisticated “mom-and-pops” while granting the investing opportunity to accredited investors only - individuals with an annual income of at least $200,000 (or joint income with a spouse of at least $300,000) or a liquid net worth of at least $1 million – in other words, those who can “afford” to lose money.
There are options. Why not educate the public on the potential risks? And - why nobody remembers about the best protection you can think of – those 5 and 10 per cent limits I was talking about? BTW, following that logic, wouldn’t it be nice to “protect” people from losing money in gambling? Online sports betting market for example has grown from about $24 billion U.S. dollars in 2004 to approximately $74 billion 2012 - which means that the size of this industry now is larger than the VC and angel investing markets combined!
Remember the story of Oculus Rift, a company that had been crowdfunded by Kickstarter’s backers who donated a stunning $2 million and then the company was snapped up by Facebook for $2 Billion? Naturally, the backers didn’t capitalize on the exit event – and this is when they were the first who took a risk. I am starting to feel that the general public is becoming a testing tool for the “sophisticated” investors who could do an investment decision based on the “score” that the startup got from Kickstarter backers.
As for the solution, well, I have quite a few colleagues from CFIRA trying to lobby the important provision in WDC, but meanwhile if you’re looking for answers check out the experts and their speeches at our upcoming Alternative Funding Forum (www.metropoleglobal.com) this Friday (Nov 21) here in LA where we’ve got a great selection of topics on funding sources and opportunities available in the market right now shared by some of the best experts in the nation. So the good news – I believe startups right now have a really rich range of funding options like never before but it is very important to educate yourself about which particular option is right for you.
Q: What advice would you give someone trying to get into crowdfunding right now?
First, it is very important to understand the difference between reward based (with market leaders such as KickStarter and Indiegogo) and equity based (crowdinvesting) crowdfunding. While choosing the path of the reward based platform might sounds like a good deal – after all you are not giving up any equity – I would never suggest anyone to move forward with this option unless you have a very strong following on social media.
I am an economist by education and am always tempting to come up with some formulas. So my suggested math would be the following – if you have 2,000 followers on FB or Twitter, you might want to assume that at least 10% would back you. Statistically, the average donation is $70 per backer, so with 2,000 followers you might count on just a $14,000 donation. If you are looking for anything more than this amount I would strongly recommend to work on your social media profile - a few months before launching an actual campaign. Or – move forward with another option.
And this might be crowdinvesting – which so far is available for accredited, aka angel, investors only forming the actual “crowd”. The good news is that crowdinvesting disrupts traditional angel investing here in the US, it means now you can “meet” angel investors online instead of chasing them at golf clubs or private events. There are numerous operating websites where you can raise capital in exchange for your company equity or profit-share arrangements: such as AngelList.com, EarlyShares, CircleUp, Crowdunder, InvestedIn, Fundraise, FlashFunders etc.
Q: What resources and events (blogs, books, conferences, podcasts, videos, etc) would you recommend to someone looking to become a crowdfunding expert and why?
Well, our annual Alternative Funding Forum is just around the corner – it is set for this Friday Nov 21st, at the iconic Plaza Hotel, here in Los Angeles www.metropoleglobal.com It is a truly unique top-class event as we present world-class speakers and a road-map of the whole range of the funding opportunities which include not only crowdfunding but also EB-5 capital (foreign capital for the US companies), royalty financing, funding via bitcoins, business grants, loans and much more. My goal is to ensure everyone understands that crowdfunding is part of the existing financing system and that all parts of this system are viable for re-building an entrepreneurial capital market as a whole. It is a highly dynamic, “pitch free” event with a think-tank theme – no self-promotional speeches or sleep inducing presentations allowed. I’ve been always against the old school “transactional” networking and wanted to build a forum for brainstorming, sharing knowledge and building relationships that will enable every participant to have real impact. BTW, we are almost at capacity so if anyone reading this is interested – hurry up, you can register here.
As for crowdfunding events specifically – as far as I know there are plenty of good conferences all over the country including NY, Las Vegas and Silicon Valley that focus on crowdfunding.CrowdfundBeat.com and Crowdsourcing.org are always good in listing the related to crowdfunding industry events and they organize some of their own; they are also providing a great set of reports and videos that would help anyone to have the most up to date information on the industry trends.
Crowdfundingplanning.com and Crowdboarders are great sources for educating yourself on how exactly crowdfunding works, Leverage-PR is clearly a leading PR company focused specifically on crowdfunding, Crowdcheck has a very strong team of lawyers to help you to navigate through complicated regulations, disclosure issues, etc . If you are looking for a book - “Crowdfund Investing For Dummies” should be a good start. Finally, CFIRA, which I am a part of, is one of the most active and reputable advocates on equity crowdfunding working closely with the Securities & Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and other governmental entities so I would strongly recommend you to check their website or see if you could to be part of the organization.
Q: What are you doing to make sure you continue to grow and develop as an industry leader?
I have my advisory business and as an alternative funding expert I strive to learn new tools, regulations and any updates every day and am constantly in touch with my colleagues from all over the word. I am on the board of Los Angeles Venture Association, I teach an Entrepreneurial Finance Course, I write for the Huffington Post and Los Angeles Business Journal and I organize one of the most prestigious events in the funding industry. I’ve never treated knowledge like a fixed asset, I am constantly learning myself and I love to read books and studies on finance, philosophy and psychology. By the way, I’ve just got invited to the Asia Crowdfunding Summit to be held in China next year. It would be great to learn Chinese at some point!
Q: Can you tell us a little bit about how social networking and Web 2.0 have affected your organization or you personally?
I am a big fan of LinkedIn which has helped me a lot in my business. I run two groups there – Global Crowdfunding and Global LAVA. BTW, if you are looking for a good business book to read – “The Start-up of You” written by Reid Hoffman, the co-founder of Linkedin, is terrific. I’ve got my first Facebook account and Twitter account only a year ago – believe it or not, and only because I realized that I am becoming a public figure – although that was not really in my plan. I must say I do enjoy FB but do use it primarily for business, and I am still learning Twitter – thanks to one of our forum’s sponsors SocialRadious, a media service company that does outstanding work on assisting my team with this.
Q: What do you think the crowdfunding space will look like five years from now?
I would love to believe that eventually crowdinvesting will be available for everyone in the community regardless of their income or financial position. I also would like to believe that eventually the crowd would invest not only based on the company’s projections of how much profits are going to be made, but HOW they are going to be made – if the firm use a Chinese sweat-shop, it should be outed in social media – that’s the hidden power od social media that is hopefully going to be unleashed.
Overall, I believe the crowdfunding industry, which is the most growing industry in the word right now, will continue to give a birth to numerous new companies in the intermediary space (crowdfunding portals), financial sector (online stock-brokers, informational portals aka “Bloomberg” for start-ups, general financial services) and online financial education. This should trigger the further expansion of “crowdfunding infrastructure” industry (regulatory and operating software) as well as the advertising industry and digital media. And of course I am sure the security lawyers will be busy too! By 2025, according to the World Bank study, the global crowdfunding market could reach between $90 billion and $96 billion — which is almost twice the size of the global venture capital industry today.
Q: What ultimate goal are you working towards?
The world is changed by your example, not your opinion – that’s my mantra. I feel I am on a mission to inspire others while sharing my knowledge and uniting people who, like myself, believe in a life of wisdom, intelligence and progress.
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