COMMUNITY DEVELOPMENT FINANCE & REGULATION CROWDFUNDING A new capital source for CDFIs and the communities we serve

Transcription

1 COMMUNITY DEVELOPMENT FINANCE & REGULATION CROWDFUNDING A new capital source for CDFIs and the communities we serve

2 Agenda 1. City First Enterprises 2. What is Crowdfunding? 3. New Access to Capital through Crowdfunding 2

3 CITY FIRST ENTERPRISES

4 MISSION To expand opportunity for low-income families and strengthen underserved communities through economic justice to effect transformative impact. STRATEGY To achieve our goal we channel capital and finance services to those without access and launch innovative solutions to empower local communities. VISION Capital is a catalyst that allows communities to grow -- John Hamilton, President 03 4

5 City First Family Community Wealth Building Initiative (CWBI) CFE Impact Investment Fund CROWDFUNDING CDFI Platform 6

6 A Track Record of Innovation City First Incubates Mission Finance Strategies City First Bank opens with $10M in capital and a mission to support DC s underserved areas City First Homes, a workforce housing and gentrification response program provides 100 permanently affordable homes in first three years CFE selected to plan the Community Wealth Building Initiative to launch employeeowned businesses servicing DC region s anchor institutions CFE begins by challenging financial racial inequities in DC and leading a community response City First begins investing New Market Tax Credits in distressed neighborhoods - $350M in 10 years CFE Enterprise Fund launches CFE begins research and advocacy on mission investing through CDFI Crowdfunding. 05 7

7 City First Family Assets ASSETS $250MM NEW MARKET TAX CREDITS $370MM MISSION FINANCE $750MM EMPLOYEES 50 City First Bank consistently ranked top 5 by NCIF for mission impact City First Enterprises Winner of White House Social Innovation Fund

8 City First s Impact 80% 5,000 7,000 4,000 Affordable Homes Charter School Seats Jobs Created or Retained City First Bank loans are in low- and moderate-income communities 08 9

9 City First Bank Lending 80% of City First Bank loans are in low- to moderateincome communities 12 10

10 crowd fund ing kroud ˈfəәndiNG Collective effort of individuals who network and pool their money, usually via the internet, to support efforts initiated by other people or organizations. Use of small amounts of capital from a large number of individuals to finance a new initiative. 10

11 Types of Crowdfunding 1. Donation 2. Reward & Pre-purchase 3. Peer-to-peer (P2P) 0% Interest Lending 4. Securities Debt/Equity 11

12 Crowdfunding a Timeline Cooperatives, loan funds raise project-specific funds using fundraising from a crowd Pre-21 st Century Kickstarter launches for art and design projects, goes on to see over $27M pledges in SEC releases proposed rules for crowdfunding DonorsChoose launches 2005 Kiva makes first seven loans 2012 Crowdfunding platforms raise over $2.7B through over 1 million campaigns JOBS Act passed 12

13 National Bipartisan Support U.S. Jumpstart Our Business Startups (JOBS) Act was signed into law April 5, 2012 and included Title III, the Crowdfunding Act 13

14 Crowdfunding Proposed Rules 14

15 JOBS Act Title III Capital Raise Limited to $1M over 12 Months Single Investor Can Invest: If income is above $100k: If income is below $100k: $2,000 5% of income 10% of income UP TO $100K Must Use a Funding Portal or Broker-Dealer 15

16 Investor Protection Concerns Securities experts & investor protection advocates urge strong investor protection: 16

17 CROWDFUNDING AND CDFIS 17

18 Opportunity: Crowdfunding is Growing Growth in Worldwide Funding Volume (millions of dollars) Total 2012 Crowdfunding 5,100 In 2012 crowdfunding platforms funded more than 1 million campaigns. 2,660 1, (Est.) Year-over-Year Growth: 61% 72% 81% 91% Sources: Crowdfunding Industry Report, Massolution (Crowdsourcing.org); MacLellan, Kyle. "Global Crowdfunding Volumes Rise 81 Percent in 2012." Reuters. N.p., 13 Apr Web; Kiva.org/stats, and Kickstarter/org/data 18

19 Challenge: Barriers to Mission Funding Charitable Giving Sources Foundation s 15% Corporate 6% Other sources 6% Banks 38% CDFI Capital Sources Corporate 10% Individuals 79% Individuals 19% Gov t 10% Internal Funds 6% Philanthropy 10% Source: First Chart: 2013 Giving USA: Giving USA 2013 Report Highlights, Accessed June 18, Overview of giving in (2013), Source: First Chart: 2013 Giving USA: Giving USA 2013 Report Highlights, Accessed June 18, Overview of giving in (2013), Second chart: ExtrapolaJon based on The Financial Crisis and CDFIs: A Brief Look at CIIs Data, CDFI Fund. Second chart: ExtrapolaJon based on The Financial Crisis and CDFIs: A Brief Look at CIIs Data, CDFI Fund. 19

20 Demand for Impact Investing Very Interested 10% Not at All Interested 13% Interested, Want to Learn More 38% Not Yet Sure 39% *For U.S. population with over $80K HH income Source: Hope Source: ConsulJng. Hope ConsulJng. Money for Money Good: The for Good: US Market The US for Market Impact for Investment Impact Investment and Charitable and Charitable GiXs from GiXs Individual from Donors Individual and Donors InsJtuJons. and InsJtuJons. May May

21 CDFI Capital Demand 136 CDFIs see capital demand shortfall of $880m in 2011 Opportunity Finance Network Survey Source: Dolan, Cathy. CDFI Bond: Opportunity of a Decade. Rep. 2nd ed. Vol. 23. Federal Reserve Bank of San Francisco, Community Investments. Page

22 Milken Institute Crowdfunding Roundtable Summarizing topline consensus JOBS Act Crowdfunding event: Crowdfunding: Promoting the Promise and Minimizing the Peril, summarizing July 26th 2012 event. 22

23 Ecosystem Policy and Practice 24!

24 THE CDFI LEVERAGE By coupling crowdfunded capital with CDFI lending, we can generate more mission investment, deepen community engagement, and strengthen organizations, enterprises, and people working to enhance their communities City First Enterprises!

25 How It Works CDFI Platform Mission lenders fill gap needed Nonprofit Borrower Capital Stack Issuer Equity Crowdfunding CDFI 25

26 Regulation A+ - Proposed 26

27 Questions? Suzanne Adatto Assistant Vice President, CFE City First Enterprises!