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By Roz Rogoff

About this blog: In January 2002 I started writing my own online "newspaper" titled "The San Ramon Observer." I reported on City Council meetings and other happenings in San Ramon. I tried to be objective in my coverage of meetings and events, and...  (More)

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Uploaded: Sep 24, 2012
I just received a brand new product from a company called Lumi Co. The product is an Inkodye set, which is described on the package as "Amazing dyes that develop their color in sunlight." I haven't tried it yet, but it claims it will print color photos on cotton or silk with just the light of the sun.

This sounded like an interesting idea. I thought it had the potential to become a new tween fad. So I pledged $35 on Kickstarter to help Lumi Co. make their new product. I received the Inkodye kit as my reward. Lumi raised $268,437 from 3,525 backers with pledges from $1 to $625.

I learned about Kickstarter from Joy Furtado, one of the cat fosters in Safe Cat. Her son posted a project for "A multi-sensory live concert experience with banjo and slide guitar virtuoso, singer-songwriter, and cupcake connoisseur Tony Furtado." I pledged $25 for a copy of the CD, DVD, and the cupcake recipe. Tony raised over $19K and recorded his band on November 17, 2011. I liked his first track "Golden" so much I used it as the theme on my Blogtalkradio show.

Kickstarter is an investment in an idea, a product, or a performance. Prosper is investing for income. With Ben Bernanke keeping interest rates near zero, there are few opportunities to invest for interest income. Prosper offers investors interest rates from about 7% for highly rated borrowers to over 35% for risker ones.

I heard about Prosper from a TV news report four years ago. I suggested it to a friend who needed to pay off her credit cards. I put up $500 for her Prosper loan but on most of the others I "bid" $50 or $100. My friend's note was paid off last year and I made approximately $140 on my investment of $500.

I bid on several other projects on Prosper for people I don't know but whose projects sounded interesting or worthwhile. I took a chance on a young man in Colorado who wanted to expand his doggy daycare from 8 dogs to 12. He needed $3,000 but his Prosper rating was E, which is very low. The interest on his loan was 34.35%. I invested $50. He made every payment since December 2010. My original $50 investment is almost paid off with another year to go on the loan.

Since the amounts are small, $50 and up, even if you make one or two bad choices the losses are not great. I have not lost any money investing on Prosper. The loans have either been completed, or the principle has been repaid, or I'm still receiving regular monthly payments.

Another form of peer-to-peer lending is Donor's Choose, for non-profit fundraising for specific projects. I've contributed $50 or $100 for teachers in inner city schools to buy materials or musical instruments to help students learn new things.

Last year the San Ramon Express published an article about Schubros Brewery using crowdfunding to start up their craft beer company. I contacted Ian Schuster about investing. I was hoping to get in on the ground floor of a potentially profitable startup. The initial equity investment was $5000, which I couldn't afford to risk, especially since I don't even drink beer.

Schubros later sold shares for $1 each, which is more my economic level, but I still don't like beer. Schubros is counting on passage of H.R. 2930 to amend the securities laws to provide for registration exemptions for certain crowdfunded securities to make it easier for small businesses to raise money by selling shares directly to the public.

Congress passed H.R. 2930 last November. The Bill, now named the Entrepreneur Access to Capital Act has been sent to the Senate for approval. Entrepreneurs need capital but are having a hard time getting it.

Banks have a lot of money but they are not lending it. Corporations have a lot of money but they are not spending it. Billionaires are given tax breaks so they will have more money to invest in new and expanding businesses to help grow the economy, but too many billionaires are investing in political ads to keep politicians in their pockets and out of their wallets.

I shall write Senators Boxer and Feinstein to tell them to get this Bill moving. Once it is passed by the Senate and signed by the President, we can join together to crowdfund businesses with the capital they need to get the economy up and rolling again.
Local Journalism.
What is it worth to you?


Posted by Lumi, a resident of another community,
on Oct 1, 2012 at 2:18 pm

Thanks for mentioning us, Roz! Now that our Kickstarter campaign has ended, readers can order Inkodye through our website if they are interested >>
and follow what we are up to on our Facebook page >>

Posted by Roz Rogoff, the San Ramon Observer,
on Oct 1, 2012 at 3:28 pm

Roz Rogoff is a registered user.

I just received an email from Senator Diane Feinstein about the Jobs Bill, which I supported. She didn't vote for it for the reasons below, but it passed and included a section on Crowdfunding. This is good news for startups like Schubros.

Here is the complete text of Senator Feinstein's email:

"Dear Miss Rogoff:

Thank you for writing me to express your support for the "Jumpstart Our Business Startups (JOBS) Act." I appreciate hearing from you and welcome the opportunity to respond.

Like you, I believe Congress must work to help small and emerging companies access the capital they need to grow and develop their businesses. I understand that for truly small businesses, the cost of undertaking an initial public offering (IPO) is considerable and may prevent them from accessing the public markets. Unfortunately, the JOBS Act was so expansive in its definition of small businesses that I could not support it.

The JOBS Act (Public Law 112-106) exempts large corporations with up to $1 billion in annual gross revenue from important financial reporting requirements, including an outside audit of a company's internal controls and significant disclosures of audited financial statements. Those provisions were originally put into place after the Enron and Worldcom meltdowns, and helped restore confidence to a badly shaken financial marketplace. I voted against final passage of the JOBS Act because I felt that many of these provisions were so expansive that they would undermine market integrity. The JOBS Act passed the Senate by a vote of 73-26 and was signed into law by President Obama on April 4, 2012.

I did, however, vote for an amendment offered by Senators Jack Reed (D-RI), Mary Landrieu (D-LA), and Carl Levin (D-MI) that would have exempted companies with less than $350 million in annual gross revenue from certain financial reporting requirements. This amendment failed by a vote of 45- 54 and was not included in the final version of the JOBS Act. I also voted to support a crowd funding amendment allowing start-ups to raise money in small increments from mom and pop investors without stripping away all investor protections. This amendment was included in the final version of the bill.

Once again, thank you for writing. Please know that while we may disagree on this issue, I appreciate hearing of your support for encouraging the growth and expansion of small businesses and will keep your thoughts in mind should relevant legislation come before me. If you have any additional questions or concerns, please do not hesitate to contact my Washington, D.C. office at (202) 224-3841. Best regards.

Sincerely yours,

Dianne Feinstein
United States Senator"

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