Krishan Arora is CEO & Founder at The Arora Project, a globally recognized leader in crowdfunding & scaling high-growth ventures.
Whether you’re involved in a startup or a high-growth venture, there’s probably always one thing in the back of your mind: capital. Having working capital is absolutely key to adaptivity, and it’s one of the foundational pillars of making it out of the “startup” phase and into the “established business” phase.
In my previous article, I gave a high-level overview of the various fundraising options most early-stage founders have, and how I believe equity crowdfunding — the ability for U.S. businesses to raise funds from unaccredited investors around the globe — will disrupt and disintermediate raising capital at the early-stage/seed level.
There is no denying the inevitable truth that equity crowdfunding is becoming more ubiquitous year-over-year and is progressing into a multi-hundred-million-dollar fundraising industry for early-stage and seed-level fundraising.
Reg CF equity crowdfunding allows businesses to raise up to $1,070,000 (soon to be updated to $5,000,000) from unaccredited investors across the globe (minus a few provinces in Canada). This means your friends, family, social media followers, email list subscribers, community members and anyone who has ever believed in you or your business can, for as low as a few hundred dollars, invest directly via a credit card into your company.
Equity crowdfunding is so timely that the SEC recently provided regulatory relief for businesses looking to raise capital via equity crowdfunding given the economic devastation Covid-19 has caused. The SEC’s recent regulatory changes mean that companies looking to raise capital via Reg CF equity crowdfunding can launch faster without the needed financial statements to get the process going. Just think about that for a second. The SEC is proactively updating the regulations of equity crowdfunding, and this is a huge indicator of how important this industry is.
By now, I hope I have given you enough information to inform you that if you are an early-stage founder and need capital during these uncertain economic times, equity crowdfunding is a great option to explore.
Strategies For Raising Capital
Below are some of the strategies we used for our two most recent equity crowdfunding case studies. For a digital tutoring app that’s reinventing how students realize their academic potential, we helped raise over $1.29 million in equity crowdfunding. For a strategic irrigation management company helping farmers increase crop yield and revenue, we helped raise over $1.55 million.
Approach campaigns with investors in mind.
We created comprehensive, investor-focused messaging for page ads, emails and the campaign page.
The key here is to home in on investor-relevant information. Your primary focus in an equity crowdfunding campaign should be your company vision and growth trajectory, not exclusively your product. So while it’s still important to outline what differentiates your product, you need to simultaneously shine a light on what makes your company investable. What is your customer acquisition cost to lifetime value (CAC:LTV) ratio? What key business relationships have you secured to ensure growth? What are your projected revenues and how are you confident in realizing these projections?
Run top-of-funnel ads and retargeting ads.
Equity crowdfunding campaign ads are particularly complex, as conversions are not linear. In looking at the data across the $10 million+ we’ve raised just this year during the Covid-19 outbreak, we’ve found that most investors will not convert on the first click. Since investors have to provide their SSN, payment info and personal identifying info, they need an extra push involving multiple reminders to convert.
Harness the power of crowdfunding communities and investor groups.
Our team has spent years building our own crowdfunding community, so we have access to investors who serve as the early adopters for the deals we work on. However, for those who don’t have access to their own crowdfunding community, I’d recommend joining Facebook, Reddit and LinkedIn groups that are focused on sharing and discussing equity crowdfunding offerings. Look for communities that are not directly affiliated with any one platform or service and be ready to answer questions on exactly what makes your company investable.
At the end of the day, as investors get warier and warier of volatile markets, equity crowdfunding is poised to serve as an alternative avenue of investment. And for those with an entrepreneurial mindset, the time to get involved is now.
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Author: Krishan Arora, Forbes Councils Member