Community Development Finance & Regulation Crowdfunding - Cdvca

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

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

CITY FIRST ENTERPRISES 1993-2014 3

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

City First Family Community Wealth Building Initiative (CWBI) CFE Impact Investment Fund CROWDFUNDING CDFI Platform 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 1993 1998 CFE begins by challenging financial racial inequities in DC and leading a community response 2003 CFE selected to plan the Community Wealth Building Initiative to launch employeeowned businesses servicing DC region’s anchor institutions City First Homes, a workforce housing and gentrification response program provides 100 permanently affordable homes in first three years 2008 2009 CFE Enterprise Fund launches City First begins investing New Market Tax Credits in distressed neighborhoods - 350M in 10 years 2011 2013 CFE begins research and advocacy on mission investing through CDFI Crowdfunding. 05 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

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

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

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

Crowdfunding – a Timeline Cooperatives, loan funds raise project-specific funds using fundraising from a crowd Kickstarter launches for art and design projects, goes on to see over 27M pledges in 2010 2009 Pre-21st Century 2000 2005 SEC releases proposed rules for crowdfunding 2013 2012 Crowdfunding platforms raise over 2.7B through over 1 million campaigns DonorsChoose launches Kiva makes first seven loans JOBS Act passed 12

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

Crowdfunding Proposed Rules 14

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: 10% of UP TO 100K income 2,000 5% of income Must Use a Funding Portal or Broker-Dealer 15

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

CROWDFUNDING AND CDFIS 17

Opportunity: Crowdfunding is Growing Growth in Worldwide Funding Volume (millions of dollars) 5,100 Total 2012 Crowdfunding In 2012 crowdfunding platforms funded more than 1 million campaigns. 2,660 1,470 854 530 2009 Year-over-Year Growth: 2010 61% 2011 72% 2012 81% 2013 (Est.) 91% Sources: Crowdfunding Industry Report, Massolution (Crowdsourcing.org); MacLellan, Kyle. "Global Crowdfunding Volumes Rise 81 Percent in 2012." Reuters. N.p., 13 Apr. 2013. Web; Kiva.org/stats, and Kickstarter/org/data 18

Challenge: Barriers to Mission Funding CDFI Capital Sources Charitable Giving Sources Foundation s 15% Banks 38% Other sources 6% Corporate 10% Corporate 6% Individuals 19% Individuals 79% Gov’t 10% Philanthropy 10% Internal Funds 6% Source: First Chart: 2013 Giving USA: Giving USA 2013 Report Highlights, Accessed June 18, 2013. Overview of giving in 2012. (2013), Source: First Chart: 2013 Giving USA: Giving USA 2013 Report Highlights, Accessed June 18, 2013. Overview of giving in 2012. (2013), Second chart: ExtrapolaJon based on The Financial Crisis and CDFIs: A Brief Look at 2007- ‐2009 CIIs Data, CDFI Fund. Second chart: ExtrapolaJon based on The Financial Crisis and CDFIs: A Brief Look at 2007- ‐2009 CIIs Data, CDFI Fund. 19

Demand for Impact Investing Very Interested 10% Interested, Want to Learn More 38% Not at All Interested 13% Not Yet Sure 39% *For U.S. population with over 80K HH income Source: Hope Source: ConsulJng. Hope ConsulJng. Money for M Goney ood: Tfor he GUood: S Market The Ufor S MImpact arket fIor nvestment Impact Investment and Charitable and CGharitable iXs from G Individual iXs from D Individual onors and Donors InsJtuJons. and InsJtuJons. May 2010. May 2010. 20

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, 2011. Community Investments. Page 29. 21

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

Ecosystem Policy and Practice 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!

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

“Regulation A ” - Proposed 26

Questions? Suzanne Adatto Assistant Vice President, CFE Suzanne@CFEnterprises.org City First Enterprises!

Crowdfunding - a Timeline 12 Kiva makes first seven loans Crowdfunding platforms raise over 2.7B through over 1 million campaigns 2005 2012 SEC releases proposed rules for crowdfunding Pre-21st Century 2013 Cooperatives, loan funds raise project-specific funds using fundraising from a crowd 2000 DonorsChoose launches JOBS Act passed 2009