As businesses prepare for fundraising 2015, more and more will wade into the pool of equity crowdfunding. For small and emerging businesses, equity crowdfunding offers the attractive prospect of raising risk capital and growing a loyal customer base. But it is also a difficult process to navigate. Below we discuss three critical elements of this process for businesses to address.
Behind the Page
Construction of a successful equity crowdfunding campaign takes hard work, dedication and time. As the old maxim goes: preparation, preparation, preparation! We recommend that companies prepare for an equity crowdfunding campaign at least 3 months prior to the online launch of the company’s crowdfunding page. This time generally includes:
- Identifying your crowd (from a user/customer base analysis),
- Preparing your channels strategy for reaching that audience (traditional media, social media, events, etc.),
- Producing your critical elements (pitch video, audio, slides), and
- Securing your legal footing (remember, equity crowdfunding is much more legally complicated than a traditional rewards/donation based campaign).
- The foregoing work takes place “behind the page”. The ultimate supporters of the campaign may never actually see all the work that goes behind the page, but they may never see the campaign at all without it.
On the Page
The list of operative equity crowdfunding sites is likely to continue expanding in 2015. (See Equity Crowdfunding Sites). Currently, only accredited investor (SEC Rule 506(c)) and intrastate only platforms are operational. However, this list is itself expanding, and the list of successes is growing. Companies should choose a platform they are comfortable with according to its user profile and the ease of use.
Once a platform is selected, companies should use all of the time they need to build an elegant, functional and informative page. The video should be kept to 3 minutes (maximum) and include a clear collaborative call to action. Ease of use is key. The more complicated the pitch is “on the page”, the more likely the company is to lose potential supporters.
Beyond the Page
Companies may fail to reach their goal in an equity crowdfunding campaign for any number of reasons. Often these reasons relate a failure by the company to think “beyond the page”. Companies tend to follow belief that crowdfunding is an online-only phenomenon. This is a fallacy. The page only creates an organization space and channel; not a substantive connection.
To supplement the material on their crowdfunding page, companies should also plan as much outreach as possible (and as legally permissible) outside of their crowdfunding page to reach their target audience. This outreach should include some combination of the following elements:
- Digital Marketing;
- E-mail Marketing;
- Launch Party;
- Public and Private Events; and
- Investor Meet-ups.
By engaging in as many contact points as possible “beyond the page”, companies increase the likelihood that they will reach their target audience and, in turn, the funding goals for their campaign.
It should be noted, however, that many of the foregoing strategies have securities laws implications that are unique to the equity crowdfunding space. It is therefore important to abide by all such laws and consult an experienced professional prior to the launch of any campaign.
If you are interested in more detail related to your situation it is best to speak with an attorney.
Jeffrey Bekiares is a securities lawyer with over 8+ years of experience, and is co-founder at both Founders Legal and SparkMarket. He can be reached at firstname.lastname@example.org
Source: Smartup Legal