Equity crowdfunding appears to represent a simple solution for businesses – both start up and firmly established – that are looking to raise money to fund their vision. By allowing investors (and fans of the brand) to invest in their company online, companies view this funding mechanism as a way to bypass banks, brokers, and toxic financers. You file significantly reduced SEC-paperwork, throw a website up, and wait for your offering to go viral. Once the internet does its thing and your hyperlink is shared by e-mail as well as endless Facebook and Twitter accounts, the raise will be complete and you can begin planning the listing of your IPO.
If this seems too easy and too good to be true, you’re right – it is.
Unfortunately, too many companies and individuals are being talked into this strategy without the appropriate background information, and as such, the results of poorly executed crowdfunding campaigns are much easier to find than the success stories.
But there are success stories that were made possible only because of those who adequately planned for them. Over the past year, I have spoken with at least 30 companies considering some form of equity crowdfunding (Regulation A+, Reg CF, 506c, testing the waters, etc.). One thing I am continuously surprised by are those who are unprepared to commence an online raise.
As such, here are some general tips for marketing an equity crowdfunding campaign:
- No two campaigns are alike. Like any marketing or communications initiative, no two companies are the same, and thus, no two crowdfunding campaigns should be executed the same way. The biggest mistake I see is thinking that a one-size-fits-all marketing approach that “worked really well in the past for another company and their raise” – will be successful. It won’t.
“Successful equity crowdfunding does require a great marketing plan executed by a creative marketing team,” said Kendall Almerico, CEO of Bankroll Ventures and one of the country’s leading experts on equity crowdfunding. “Coca Cola, Cadillac and Calvin Klein do not market their brands the same way. Equity crowdfunding companies must engage a team that understands and markets the company in a unique way that stands out from all the noise.”
Take this into consideration before planning, as each company and campaign requires its own messaging, its own advertising strategy, and its own look and feel. Figure out what your strengths are, and market to them. For example, if your story has great visuals, find a way to leverage it via some form of multimedia, preferably video. Perhaps you are an emerging company working in a high-growth industry with plenty of competition. Focus on how to differentiate yourself from the competition, while outlining the existing market opportunity and what it means for you and your investors.
- Get your online presence in order. Raising money from a diverse audience and group of sources can be difficult, but nothing makes equity crowdfunding so challenging as to do so with a poorly designed or ill-functioning website. The investment website is the primary way you are soliciting funds, and as such needs to clearly lead potential investors through the offering process. Think about it – using the analogy of an open house – why leave your trash on the front lawn, not fix the fence, and neglect a new paint job? Getting your digital presence ready means focusing on messaging for the website, carefully reviewing the design and aesthetics, proofing all content, and last but not least – making sure the user experience is a positive one! Do not underestimate the importance of the landing page for your online offering.
Further, legal context with regards to selling securities online must be considered. “General solicitation under the JOBs Act can open up many doors for a company seeking investments, but please, run your proposed content by your securities lawyer,” said Andrea Cataneo, securities attorney with Sheppard Mullin Richter & Hampton LLP.
“Solicitation can mean advertising, webinars, internet offerings, group presentations, but it does not mean hype or exaggeration.”
- Identify and market to your audience. Understanding your ideal investor profile isn’t easy, but it needs to be done to build and leverage a captive audience. If you are a company reading this and looking to raise money online, and already possess an existing database of thousands or even hundreds of thousands of contacts (be it customers, clients, partners, etc.) with e-mail addresses, congratulations! You are ahead of the curve. Or, perhaps you already have a good feel for the sort of individual who is likely to invest in your company, and now you just need to go about marketing directly to them. Review site demographics, consider the profile of past investors and interested parties, and try to make that determination early, but…
- …If you don’t have an existing audience, build one. Far too often a company approaches us with a great idea, a designed website and video that clearly spells out the investment opportunity, and a strong message for the media. This should result in success, right? Well, not always. Equity crowdfunding requires some form of direct marketing, and to do so, a company must have a base, either a significant social media following or a database consisting of contact information. If you don’t, social media advertising has proven to be a lead driver of web traffic and conversions. Consider running a Facebook advertising or Google AdWords campaign that drives specifically targeted people to your investment landing page. As many know, online advertising can be precisely targeted, and is a great way to get an idea and offering in front of potential investors.
- Stay credible, my friends. Ah, so you finally have it figured out! Plan and processes? Check. Significant database to market to? Check. Brilliantly laid out investment landing page that seamlessly takes investors through the process? Check. Perhaps you are missing one last tool – news flow. Most public companies know this already – distributing press releases that outline corporate announcements, market opportunities, industry events, and other newsworthy items are proven ways to remind current and potential investors that you are a very active company. Similarly, getting featured in third-party, earned media (no pay for plays!) builds credibility, whether it’s in a trade publication, a daily newspaper, radio show, or broadcast television. Working with a media relations and corporate communications firm is a great way to produce press coverage, and reminds investors that you are a real company making news within a high-growth industry.
Equity crowdfunding was meant to spur innovation and growth, while providing Main Street investors with a means to access high growth companies. It is certainly not an untapped source where everyday web users are patiently waiting to visit an online investment opportunity. Be prepared, be proactive, and remain top of mind, and maybe the idea hatched in your own home will one day be listed on a major U.S. stock exchange.