A New Startup Financing Model and the Passionate Voices Behind It
In 2010 Sherwood "Woodie" Neiss was trying to raise capital for his latest business concept, a data-polling app for smartphones. He had a track record as CFO of FlavoRx--an award-winning medicine-flavoring company he co-founded in 1999 and sold eight years later--and his new idea had won him a Startup Weekend pitch competition. But without three years of financials, the banks weren't interested in investing in his app; neither were angels, venture capitalists or the private equity investors who'd put millions into FlavoRx. Personal credit wasn't an option, either: Thanks to the recession, Neiss' Miami home was underwater, and his credit card limits had been slashed.
Suddenly the capital crunch faced by so many startups after the economy tanked became personal. "I was irritated by the fact that I could do it before and now have that credibility and not be able to do it again," Neiss recalls.
Many people complain without taking action. Neiss is not one of them. Along with buddies Jason Best and Zak Cassady-Dorion--all graduates of Arizona's Thunderbird School of Global Management and serial entrepreneurs familiar with the financing dance--Neiss decided to push for what he saw as a solution to his problem: crowdfunding. To him and his friends, it was crazy that businesses raising capital were still beholden to securities regulations written nearly 80 years ago--before the invention of personal computers, let alone Facebook and Twitter--and especially when so many Americans need jobs.
Sitting at Best's dining room table in San Francisco, the three hashed out the changes to securities regulations they thought were needed so that entrepreneurs could raise small amounts of investment capital from friends, family and
