The Art to Closing Crowdfunding Investors
Closing investors is never easy. In the past, it required facetime with each investor and a lot of chasing to eventually get the money wired into the bank. Crowdfunding has moved investing online, which introduces an entirely new efficient way to close investors.
Below are the 5 techniques you should incorporate into your strategy to successfully raise money through crowdfunding:
1.Build a Powerful Crowdfunding Campaign 2.Make Yourself Available Immediately 3.Pitch Game On 4.Crowdfunding Perks 5.Create a Sense of Urgency
Build a Powerful Crowdfunding Campaign
The beauty of crowdfunding is that investors now have access to all the information they need to invest instantly online. The first step to closing investors is creating a comprehensive crowdfunding campaign that tells a compelling story to attract investors to your deal.
It is important to distill down your value proposition in a clear and powerful way to grab the investors attention instantly. The most compelling way to do this is through a lead investor who has validated the terms of your fundraise, which provides immediate social proof for your deal. Investors can then follow-on at the same terms of that investor who has already done their diligence on the company.
You then need business traction to justify the terms of your fundraise and the right team to execute on the mission. Lastly, you will need to have the necessary deal documents in place like a term sheet and investor pitch deck to execute the crowdfunding campaign. Once you’ve nailed the value proposition and have all the key elements in place you are then ready to take your deal to the masses through crowdfunding.
Make Yourself Available Immediately
Give your investors VIP treatment since they are an integral part in achieving your crowdfunding and business goals. Don’t wait any longer than 24-48 hours to respond to investors once they show an interest in your deal. Offer to do a phone call with that investor to signal that you value their interest and are willing to go the extra mile to close them. On that call, be prepared to answer any and all questions as it pertains to your business, especially your metrics. If you make yourself immediately and are able to nail all the investors questions, you’ll be in a great place to close any investor.
Pitch Game On
Pitching investors is a skill that takes time to master. It starts off with a well designed pitch deck that covers everything an investor would need to know before wiring the money. Check out this pitch deck template to get you started on the right track.
Once you have the pitch deck in place, it is important that you pitch to both the rational and emotional side of the investor. The rational side will come down to the metrics and if they add up to a winning business. The emotional side is critically important as investors invest in people and companies that solve real world problems. They will need to connect with you and believe in your idea and mission. Make sure to craft your story to touch on both the rational and emotional side of the investor to guarantee success.
Crowdfunding Perks
Perks can make a crowdfunding campaign unique and help convert investors into your deal if they are compelling and valuable. It’s important to think creatively and offer experiences that money can’t buy. The experiences should be connected directly to your business. For instance, if you are launching a wine venture, offer a private wine tasting dinner with the winemaker. If you are launching a software product that helps consumers learn how to play music, offer a private studio session with a well established music producer. Perks are a powerful way to help close investors into your deal, or have them level up to a higher investment level to get that perk experience. Create a Sense of Urgency Even if you have the best perks and pitch deck out there, you won’t close investors if you don’t provide a sense of urgency. If an investor believes that there is a very small window to get into a deal they will act swiftly to ensure they get into the deal. No one wants to miss out on the opportunity to invest in the next Snapchat or Facebook. Use this to your advantage when pitching investors and give hard deadlines to convey that there is limited space in your deal. If you’re able to create a sense of urgency, you will tip the scales in your favor. Closing investors is an art, not a science. You will always be pivoting and reworking your pitch and gauging each investor individually but if you follow the steps outlined above, you will be on your way to closing every investor that comes your way.
How To Leverage Press To Get Your Startup Funded
A key component to a successful equity crowdfunding campaign is to utilize the press to amplify your story and reach a much larger set of investors. Using the media to your advantage offers you the opportunity to tell a much larger story than just your fundraise that results in the perfect storm, which has the potential to have a massive impact on your fundraising efforts.
This article will touch on the 5 steps to take when doing an equity crowdfunding campaign.
Steps to Success:
1.It’s All About the Story 2.Create the Perfect Storm 3.Fundraising Perks 4.Leverage your Media Relations 5.Distribute the Content
It’s All About the Story
Telling a story is one of the most critical pieces to getting your company funded. Investors invest in people. So if they aren’t moved by the story you’re telling or the problem you’re solving, they most likely won’t end up investing. Be clear and concise with your value proposition so potential investors reading your story instantly connect and want in.
This is especially true when it comes to press for your fundraise. The reality is that no media channels care that your fundraising. This means that it’s your job as the entrepreneur to leverage aspects of your business other than your current fundraise to create a compelling story that has mass appeal.
With any of your marketing efforts when using equity crowdfunding, the ultimate goal is to get dollars closed into your fundraise. So we are not saying that you should exclude your fundraise from your press release entirely, but instead have that as a line item in the larger context of your story.
If you nail your story and have an interesting and unique news hook, the press will pick it up and it will propel your equity crowdfunding campaign to the next level.
Create the Perfect Storm
When it comes to press for your equity crowdfunding campaign, timing is everything. It is critical that you time your press push around something notable happening in your company whether it be a big partnership, notable investor investing or launch of a new product. This will create the news hook we talked about and produce the buzz you are looking for.
It’s important to also think of different verticals to pitch your story too. Meaning if you are a technology company don’t just circulate your story to TechCrunch and Mashable but think outside the box and go after less traditional outlets that may have a connection to your particular story whether it be the local media or other relevant verticals.
Fundraising Perks
Equity crowdfunding gives you the unique opportunity to provide perks to the investors that invest on top of the equity they receive. Perks can often be an interesting hook that appeals to the media and can lead to more interest from journalists. Look to provide once in a lifetime opportunities that money can’t buy when using perks to not only appeal to the media but to accredited investors who want those unique “money can’t buy” experiences.
Referring back to Neil Young’s PonoMusic they gave investors the opportunity to attend a private concert with Neil Young. These perks can boost your campaign and entice investors to invest extra for the perks offered. It’s also an excellent mechanism for closing investors once you’ve built momentum in your equity crowdfunding campaign. Always look to include perks to investors when using equity crowdfunding platforms like TieUpNow to make your story and fundraise unique.
Leverage your Media Relations
Press releases are great but they won’t help you achieve meaningful coverage. The release is an asset, or a kind of fact sheet, to send to media who ask for more information. Or it can be used to post over BusinessWire so that when people Google your company they can see your recent news.
The best way to achieve meaningful coverage is to cherry pick three or so key publications that you believe your target audience read. TechCrunch is great – but if you are launching a new wine label – you might be better off reaching out to some wine trade publications about your story.
Research journalists at those publications that have written about similar topics in the past. Send them an articulate and simple pitch highlighting why this story is of interest to them. If you need a guide try and keep the pitch to about three, two sentence paragraphs.
Please note – telling an editor you want coverage is not a reason for them to cover your story. Try and tell them why their audience would find this story interesting – you can often do this by articulating what aspect of the story would truly excite their readers and have them coming back for more.
Distribute the Content Once you’ve generated buzz in the press by building that larger story and timing it perfectly it’s important to distribute that content through various channels such as Facebook, Twitter, LinkedIn and newsletters. This is how you can achieve the viral effect that will ultimately complete your fundraise.
If you are working with influencers ask them to post a link to the TieUpNow campaign with copy that would entice their fans to click through. With the copy, try to make it so enticing that people can’t help but click through and try and want to partake in the opportunity.
Facebook is now strictly pay for play. Even if you have 50,000 fans only 1-2% will see the post unless you boost it. Try and reserve some money to boost the post about your TieUpNow campaign to ensure it reaches a wider audience.
Look to leverage 2nd and 3rd degree connections when using social media to ensure your campaign is achieves the highest reach possible.
Conclusion
Leveraging the power of press can sometimes be the difference between falling short and a successful fundraise. It is up to you to create that perfect storm which ends up yielding millions in dollars committed to your equity crowdfunding campaign.
Equity Crowdfunding Marketing Checklist A successful equity crowdfunding campaign doesn’t catch fire by itself—it needs to be driven from start to finish and gain momentum by getting it in front of investors with an integrated marketing strategy. It starts with providing a compelling business offering with a lead investor already attached who has solidified the terms of the deal. It’s then up to you to build a great profile and launch a marketing campaign around your equity crowdfunding campaign.
We’ve helped you by compiling the different ways you can effectively market your equity crowdfunding campaign. Note: These marketing tactics can only be utilized by deals that are running a public fundraise.
Create Profile That Unlocks Investment
Company Profile
1.Video (2-3 Mins) 2.Product Images 3.Business Traction Points 4.KPI’s 5.Team 6.Key Customers & Partners 7.Press mentions 8.Testimonials
Investment Profile 1.Fundraising Documents 2.Investor Pitch Deck 3.Term Sheet 4.Executive Summary 5.Subscription Documents 6.Highlights 7.Investors 8.Previous Funding 9.Fundraising Goal
Press 1.Issue a press release highlighting your TieUpNow deal 2.Tell a bigger story 3.Hit all the relevant verticals
Leverage Social Media Channels 1.Facebook 2.Twitter 3.LinkedIn
Activate your Stakeholders 1.Investors 2.Board Members 3.Advisors 4.Friends & Family 5.Board Members
Company Website 1.Homepage banner linking to your TieUpNow deal 2.Post to blog 3.Syndicate the blog out to your network 4.Send blast to company mailing lists
Perks 1.Create a set of perks that are unique to your business to incentivize investors to close quickly 2.Create experiential marketing opportunities that money can’t buy
Actively Follow-Up with Interested Investors Don’t let pending requests sit in your Deal Admin. Make sure to follow-up with each investor within 24 hours and make yourself available – this is critical
Trend on TieUpNow TieUpNow bubbles up companies that are performing well on the platform and features those companies to our network of Accredited Investors
Term Sheet Examples & Templates To put it simply, Term Sheets are complicated. This is because investment terms, company valuation, and the longer-term implications of investment terms are not “one size fits all.” In fact, these are some of the biggest areas of confusion for early stage founders.
Convertible Note Term Sheets TheFunded.com and Wilson Sonsini Law Firm put together this sample Convertible Note and had it written up and explained on TechCrunch
Y Combinator’s “Simple Agreement for Future Equity” or SAFE Alternative Financing Mechanisms Personal Investment Contracts as innovated on and explained by Rafe Furst, angel investor, mentor at the Unreasonable Institute, co-founder of tieupnow.net
Creating Your Term Sheet & Equity Crowdfunding After reading through these resources, be sure and consult and work with an experienced attorney to create the right financial offering that makes sense both for your company, and for investors.
Finally, one of the more subjective areas is Startup Valuation. To look at some data and info to guide you, take a look at this post from the Angel Capital Association on Pre-Money Valuations of early stage angel / Seed deals.
Take-aways from early stage angel deal valuations from a variety of sources are: 1.Median pre-money valuation in 2011 and 2012 for software/internet startups was $2.5MM 2.The median for life science startups was $3.2MM, and clean tech $3MM 3.Valuations in Silicon Valley, LA, Boston, New York higher than elsewhere in US
Crowdfunding Terms
Donation-Based Crowdfunding Donation-Based Crowdfunding: This is similar to reward-based crowdfunding. An investor makes a “donation” to a company and receives value in the form of a product in return. Kickstarter uses this model to essential pre-sale products.
Rewards-Based Crowdfunding Reward Crowdfunding involves the pre-sale of items that will be created if funding goals are met. This type of funding does not attract investors who are looking for monetary gains, but instead attracts individuals who are looking to have new, one-of-a-kind products before anyone else. This means that most projects that are looking for reward crowdfunding have a new product that requires initial investment to begin production. This is essentially the model that Kickstarter uses.
Equity-Based Crowdfunding Equity-based crowdfunding involves an investor receiving a portion of the company in return for his or her investment. Essentially, the investor will become a shareholder in the company and be able to vote on decisions to be made. Furthermore, the investor will be able to sell his or her share, or a portion thereof, in the future for the current market value. There are certain risks to equity-based crowdfunding as with any other types of investments. This is the type of crowdfunding tieupnow operates under.
FINRA The Financial Industry Regulatory Authority is responsible for governing business between brokers, dealers and the investing public. FINRA aims to eliminate regulatory overlap and cost inefficiencies.
SEC The SEC is a federal agency that enforces federal securities laws and oversees the securities industry.
JOBS Act Jumpstart Our Business Startups Act (JOBS) act: The JOBS act was created in order to ease security regulations on small businesses. The JOBS act was signed by Barack Obama on April 5, 2012.
JOBS ACT – Title II (Access to Capital for Job Creators): Title II lifts the ban on advertising for regulation D, Rule 506 and Rule 144A offerings. It also lifts the ban on general solicitation.
JOBS ACT – Title III (Crowdfunding): Title III allows individuals to make investments in small companies without being accredited investors. The company is allowed to receive up to $1 million over any 12-month period. Investors may not purchase more than $2,000 in securities or a certain percentage of his or her annual income or net worth as long as it is under $100,000 during a 12-month period.
Accredited Investors There are two (2) ways in which an individual can be an accredited investor. One of the following must be true in order for an individual to be an accredited investor. (1) First, an accredited investor must have at least $1 million in net worth at the time of investment. This worth can be measured jointly with a spouse as well. (2) Second, an accredited investor must have an income of more than $200,000 in each of the two previous fiscal years. However, if the income is joint with a spouse, the previous yearly income must be more than $300,000.
General Solicitation General solicitation involves publicly seeking an offer through advertising or mass communication such as social media.
Regulation D for Crowdfunding Regulation D Crowdfunding is the process of seeking funding, either equity or debt, online done by private companies.
Bootstrapping Bootstrapping involves a founder, or founders, using personal finances to fund a new company. This is often sought after due to the fact that founders will not have to dilute their ownership in a company they are starting. tieupnow can be essential to a bootstrapped company as it provides a platform for communicating and networking between new companies and the individuals working at them.
Seed Round Funding Seed Round Funding involves an investor making an early stage investment in a company in return for a share of the company. This can be an investment made by a family member or friend, an angel investor, and even through crowdfunding.
Series A Funding Series A Funding is typically done by a company who is looking to raise significant financial capital. This type of funding is often sought after angel funding has already finished. A series A funding round usually involves a venture capital firm making a significant investment in a company in return for a percentage share of it.
Venture Capital Venture capital usually involves an investment made by a firm in a small company that is seeking growth. This investment is usually much larger than an angel investment and results in the venture capital firm becoming integral in the decision making of the company.
Angel Investors An angel investor is an individual who makes an early investment in a start-up or company in exchange for debt or equity in said company. Angel investors can often organize themselves into groups in order to pool investments. This investor can also be an early advisor to the company as well. Executive Summary A nontechnical summary statement at the beginning of a business plan that’s designed to encapsulate your reason for writing the plan.
Investor Deck The pitch deck is the first thing you will use when interacting with a potential investor. In many ways, it is one of your most important tools. The content of the pitch deck, along with your presentation, can help the investor to determine whether or not to continue evaluating your business opportunity.
Term Sheet A non-binding agreement setting forth the basic terms and conditions under which an investment will be made. A term sheet serves as a template to develop more detailed legal documents.
Convertible Note Convertible notes are structured as loans at the time the investment is made. The outstanding balance of the loan is automatically converted to equity when a later equity investor appears, under terms that are governed by the terms set by the later-stage equity investor.
Pre-Money Valuation Pre-money valuation refers to the value of a company not including external funding or the latest round of funding.
Post-Money Valuation Post-money refers to its value after it gets outside funds or its latest capital injection.
JOBS Act Crowdfunding Details
The Crowdfund Act The Jumpstart Our Business Startups Act (JOBS Act) was passed with bipartisan support by Congress and signed into law by President Obama in April 2012. Following on the success of donation-based crowdfunding, the JOBS Act now enables businesses to solicit securities-based funding from the general public – also known as Business Crowdfunding.
Unlike the Donation Model of crowdfunding on sites like Kickstarter, where people donate to creative projects and does not allow any return on funds invested, securities-based crowdfunding allows investors to receive a financial return through the purchase of equity, debt, or revenue-based securities.
The JOBS Act also expands investment opportunities to non-accredited investors, who have been historically excluded from this process. For the first time in our lifetime, every American will have access to investing in startups and small businesses and sharing in their financial success. Although you cannot take in investment from non-accredited investors yet, sign up to tieupnow now and get your deal in front of our active network of Accredited Investors.
tieupnow Legislation & Regulatory Leadership Our team got involved in crowdfunding legislation and regulation early on in November of 2011, as the first crowdfunding legislation was introduced to the House of Representatives, sponsored by Congressmen McHenry. Since then, our management team has been engaged with leadership in Congress, the SEC and the White House. We’re also founding participants of the crowdfunding industry and trade associations, CFIRA and CfPA.
Key Points of CROWDFUND ACT under The JOBS Act A company will be able to crowdfund up to $1 million over a 12 month period.
Individuals with annual income or net worth of less than $100,000 may invest up to $2,000 or 5 percent of their annual income or their net worth, whichever is greater, over a 12 month period. Individuals with annual income or a net worth of $100,000 or more may invest up to 10% of annual income or net worth, capped at $100,000 maximum aggregate amount, over a 12 month period.
Investors can fund one company or several companies as long as they remain within these annual limits.
Minimum Review & Checks: Companies that seek to crowdfund a securities-based round must have background checks done on all principles with 10% or greater ownership in the company and provide full and adequate disclosures with a business plan and a full description of their ownership and capital structure.
Crowdfunding portals must, alongside the legally required background checks, must do a full review of the company, disclosures and the raise in order to approve a company prior to fundraising.
An investor must wait a minimum of 12 months before selling her/his securities unless the sale is to a family member, the issuing company, or an accredited investor, in addition to other restrictions normally placed on the transfer of securities.
A crowdfunding round does not prevent a company from raising capital through other legal channels. Companies crowdfunding will be exempt from the 500 shareholder cap pursuant to rules and regulations of the SEC.