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.