Raising Company Equity through Crowdfunding – an Interview with Chance Barnett, CEO of Crowdfunder

Crowdfunding is being used for a wide variety of fundraising purposes these days, not the least of which are (a) equity for growing companies and (b) financing for real estate projects.

Crowdfunder is the number one ranked equity crowdfunding site on Google, with over 77,000 registered users and $56 million committed across investments to-date. iFunding, a real estate crowdfunding platform itself, chose to use Crowdfunder when we decided to raise funds for our corporate operations. In the first week of its campaign, iFunding raised $1,200,000 via its listing, with more expected in the coming weeks.

Because effective crowdfunding will be of interest to many of our business partners and investors, we asked the CEO of Crowdfunder, Mr. Chance Barnett, about his platform and secrets to success with equity crowdfunding.

How did you come up with the concept for Crowdfunder?

The idea emerged three years ago, after I became involved with a policy group in Washington DC that contributed to the creation of the JOBS (Jumpstart Our Business Startups) Act. That federal Act liberalized the rules enabling more individuals invest in privately-issued securities, such as startups issuing equity or real estate companies financing deals. It was exciting working with leaders in the Senate, House and SEC. After the law passed in 2012, I turned to the tremendous opportunities on the business side and decided to create Crowdfunder. I had been an angel investor and entrepreneur several times earlier.

There are many active crowdfunding sites, with a number of them raising equity for new ventures. What makes Crowdfunder unique?

There are only three or four equity crowdfunding sites driving meaningful financing volume. We are one of the largest. Most of our growth has been organic, based on the quality of our service and investments. We were ‘live’ even before the passing of the JOBS Act, acting as a startup networking and investor matching service that identified and promoted entrepreneurs in their communities. This has given us a lot of time to understand the dynamics between passionate entrepreneurs and investors, and build that into our culture and operations.

What best practices should companies be aware of, when planning to crowdfund equity?

We advise companies that:

  • Crowdfunding‘s financial returns are proportional to the effort you put into it. Plan your ongoing campaign steps – marketing and response processes – well before launch.
  • The first days of the campaign drive momentum. Leverage your best relationships and marketing ideas to reach the most likely audience to invest, starting day one. Your founders should personally lead the outreach, and the entire team should highlight the campaign to their personal contacts.
  • Investors are interested in the returns, but equally so they want to connect with your company’s mission. You should think carefully about crafting your story in a compelling way. Then, target your outreach to people who are likely to connect emotionally, including the community of existing users of your product or service, or those with similar demographics.
  • Similarly, many investors want to feel engaged with your company or learn alongside your team, by participating as an investor. They realize the financial returns will take years. Therefore, give thought to how you will include your investors in the ‘journey’ and keep them involved even after the fundraising round is complete.

iFunding is very happy with our fundraising results so far on your platform – one million dollars raised in 3 days. Do you see that level of activity frequently?

We have seen a number of companies raise hundreds of thousands of dollars in a few hours, and a million plus in a few days. iFunding is definitely one of the strong outcomes, for being active just a week so far.

How would you respond to investors who want to be confident they have the right information to decide on a startup investment?

Our platform compiles, in an easy-to-follow format, all the relevant materials from a company that is raising equity. Also, through our social networking “Connect” function, you can request to connect directly to the fundraisers, the investors in a deal, or anyone else in our investor base with a similar interest, and create a dialog via text, phone… whatever works for both of you. The “signaling” function of a social networking also helps reduce risk; you can see who already invested in a company and get a sense of their professional background and knowledge about that field.

What do investors say they like best about your platform?

We serve up a unique variety of deal flow. That is, we highlight more than just the latest consumer technology fad, like a mobile app or social media platform. Often the companies on our website have a combined for-profit, and social-good mission. We also have a growing deal flow at the intersection of technology and entertainment.

Crowdfunder is known for crowdfunding investment in Pono, which is the brainchild of rock legend, Neil Young. His goal is to record and distribute significantly higher fidelity music, “as if one were listening in the studio.” What do you think of Pono?

Pono (https://www.crowdfunder.com/pono-music) is great! I’ve been playing guitar since age thirteen, and learned quite a few Neil Young tunes. It’s a thrill to listen to the super hi-fidelity music and feel like Crowdfunder has contributed to the financing of Neil’s business venture.

Here is your opportunity to be an equity owner in iFunding!

The iFunding team is excited to announce that we are raising a round of financing for our own company. What better way to do this than to use the same crowdfunding principles that we live by day-to-day? You can read all the investment details at www.crowdfunder.com/ifunding. We encourage investors to consider participating directly in our company’s success by owning equity in iFunding.

Our Expansion Plans

After a year of raising tens of millions of dollars for nearly thirty real estate projects, and introducing the industry’s first mobile investment app, iFunding is ready for its next growth stage:

  • Real estate operations, including market analytics, deal sourcing, due diligence, entity setup, legal filings and compliance, financial reporting will be scaled up to manage more deal flow.
  • Greater ease-of-use features and richer deal information will be deployed on our web and mobile platforms.
  • Marketing, especially online real estate education programs, and digital/social outreach will spread the word about crowdfunding to more investors and property developers. Meanwhile, an account management team will work with the most prominent investors and family offices.

Learn More

Those who are accredited investors are invited to read our investment materials and participate in our corporate fundraising via www.crowdfunder.com/ifunding. Individuals will be asked to verify their “accredited investor” status via online income verification or a letter from your lawyer or CPA. And, if you haven’t already, take a moment to acquire a free account here at www.ifunding.co to be able to browse our real estate investment opportunities.

Financing Strategy

Because much of iFunding’s business model is based on receiving a profit when our real estate investors do the same – we feel this approach aligns our incentives with our investors – capital is needed to expand operations in this stage of our growth. We are now raising $1 to $2 million ($1 million is our target, $2 million is the cap), which will bridge the capital already contributed by select customers, business partners and colleagues of the firm, and an A Round planned for 2015. We feel this is the most effective sequence of funding in order to facilitate growth while managing the strategic direction of the company. As the future A Round will leverage venture capital and real estate industry financing, effectively, individual investors can benefit from crowdfunding to participate now at preferential terms, with a low minimum investment ($10,000).

Market Growth

Our founders, William Skelley and Sohin Shah, were recently reflecting on how quickly the real estate crowdfunding market has grown, since their idea for the company emerged in 2012. “There were a lot of people who thought that real estate crowdfunding couldn’t become a reality, as recently as 2012 when we were starting up. It’s been amazing how knowledgeable investors and leading-edge developers have supported crowdfunding and iFunding so confidently.”

The market effectively went ‘live’ a year ago, when companies including iFunding started listing their first investment opportunities. Our average internal rate of return in the first projects that have been completed is more than 20%. More recently, the analytics firm Crowdnetic determined real estate to be the largest industry participating in “private securities, publicly raised” (i.e., crowdfunding). Given that total worldwide real assets are worth more than $25 trillion; over $150 billion in real estate is transacted each year; and at least $25 billion of that is from individuals, we see plenty of room for future growth.

With Appreciation

We’d like to thank several partners that have assisted with this fundraising round.

  • We chose to list the investment at Crowdfunder, because Crowdfunder’s site makes it easy to read about and compare business equity investments, communicate information with potential investors, and because of their reach. It is the number one ranked equity crowdfunding site on Google, with over 77,000 registered users and $56 million committed across investments-to-date.
  • Further, we have partnered with Accredify to manage verification one’s “accredited investor” status. Investors generally need to demonstrate a certain level of income or liquid assets in order to participate in private securities. The Accredify site allows an investor to either use an easy and private verification of income against tax records, or to upload a verification letter from one’s CPA or attorney. That single verification can be used with a wide range of investment sites, including but not limited to iFunding’s.
  • Finally, our thanks goes to Tommy Hawkins of Hawk IV Productions for producing our introductory video on the investment site.

The iFunding team will continue to work every day on expanding access to quality real estate investments, and providing greater value to you. We welcome questions via 844-367-4386 or investors@ifunding.co.