Getting Your Business Crowdfunded… With Equity
Traditionally, crowdfunding has rewarded financial donors with pre-release products and other exclusive access but now, thanks to recent legal changes, fundraisers can use crowdfunding to raise money in exchange for equity in the business.
Here are a few things Dustin and Chance cover:
- How equity crowdfunding differs from perks-based crowdfunding; as well as the benefits of this model to entrepreneurs and investors alike
- The evolution of the JOBS Act; as an entrepreneur turned investor, Chance dedicated time and resources to helping pass the JOBS Act
- Which industries are well-suited for this type of fundraising, including a fun story about how Crowdfunder helped with Neil Young’s Pono
- The potential benefits of equity crowdfunding and the current legal landscape
Chance’s 6-step equity crowdfunding campaign process to help maximize the possibility for success
1) Build and communicate growth and traction
Clearly describe the metrics you use to measure success for your business and communicate how these metrics have changed over time. Many investors want to feel like they are investing in a business at the right time: when it is poised for growth, but before it becomes too expensive to invest in.
2) Build social currency around your business
Ask great people you know with strong reputations why they believe in your company or the people involved in it. Ask for permission to communicate these testimonials publicly.
3) Announce who your first or lead investor is
If you have an investor that has ponied up cash to serve as a lead investor and is willing to be mentioned as an investor in your round, this can be beneficial. Chance notes that this factor alone may drive initial interest in, attention to, and awareness of your campaign by 5-6 times.
4) Reach out to your network
After getting your first investor, keep in mind that you have a whole network of people you can reach out to, both through your investor’s network, if he or she is willing to share it, and your own personal network.
5) Celebrate momentum and success
Most investors want to be a part of a company that is successful and many investors have a wait-and-see strategy. When they see momentum and successes, this may motivate them to want to get involved. You may consider engaging or hiring a PR team to promote wins and positive occurrences for your company.
6) Take a victory lap
When you are at the point where fundraising is effectively done, consider approaching “moonshots” – people who would be amazing investors but who you may have had uncertainty approaching before the round. Let people know about your successes either publicly or privately to leverage momentum. You may be surprised by who you can get to invest when you ride the wave of momentum.