JOBS Act Progress Still Stalled. What’s Going On, McHenry?!

Written by Gene Wright. Posted in Uncategorized

Earlier this year, a California-based company raised $750,000 through debt and equity crowdfunding when the owner took advantage of a provision that allowed him to campaign on Facebook, LinkedIn, Twitter and an online crowdfunding platform.

Publicizing his campaign on personal websites is a move that really bolstered his two-year old small business. But, that option isn’t available to everyone. Why not?

Why Equity Crowdfunding Down Under is Above the Rest

Written by Gene Wright. Posted in Uncategorized

Did you know the Australia’s Sydney Opera House was built through crowdfunding? In one of the country’s most successful crowdfunding campaigns, the opera house started selling lottery tickets in 1957 to finance its construction. In 1960, the Sydney Opera House Act was passed to support financing of the almost $5 million building. It allowed the public appeal of raising capital through $3 and $5 lottery tickets in exchange for a cash prize.

More than $105 million was raised.

After the Pitch: The Importance of Due Diligence in Raising Funds via Crowdfunding

Written by Gene Wright. Posted in News

I attended a regularly scheduled luncheon with several colleagues earlier this month with whom I’m working with to define a program to help more deserving Georgia businesses obtain post angel funding in partnership with one of Atlanta’s most prestigious universities. Too many of our best emerging growth firms are leaving Georgia due to lack of intrastate funding which, if could be obtained, would keep these companies and the jobs created in our state. One of our colleagues provided an overview of a recent investor conference that his firm sponsored. The event was restricted to 15 firms (over 57 applied) and multiple investor groups from six states attended. Each business was given 5 minutes to “pitch” investors, and then met individually with interested venture firms. The event was very well received, and everyone seemed confident that term sheets for at least some of the businesses that participated would be forthcoming.  

I was struck by the questions everyone asked about the “pitch”. Some of the people in our group attended the conference and commented that some of the companies did not do a good enough job to attract investor interest because their “pitch” wasn’t well rehearsed or some critical question wasn’t addressed properly. In my experience, substance trumps form in this instance. Experienced investors look for great management teams and business models, exceptional value delivery and a great opportunity to add capital as rocket fuel to accelerate growth.

The pitch is the show, and Shark Tank investor meetups can be found everywhere in Atlanta, not just on ABC. But it what happens AFTER the show that really matters. Less than 30% of the companies that present on Shark Tank ever get the money that’s pledged. According to Mark Cuban, “We get the chance to do due diligence after the show. As a result you uncover things that were not brought up in the show, so it’s not unusual for a deal to fall through in the DD (Due Diligence) phase. I have had things like people who never paid their taxes, people who lied on the show, people who didn’t think that if they spent money on their personal credit cards it should be considered an expense. You name it”.

In my view, there needs to be more focus by business owners on “the business of business” than spending an inordinate amount of time perfecting their “pitch” before meeting investors. Don’t get me wrong, being able to concisely and confidently communicate what the business does and why it needs money to grow in 5 minutes is important, but maybe less important and embarrassing than having a deal fall though because the owner wasn’t fully prepared for  what investors REALLY expect.

Let me hear what you think!

3 Critical Steps to a Successful Equity Crowdfunding Raise

Written by Gene Wright. Posted in News

If you’re contemplating an equity crowdfunding raise, there are three non-negotiable, foundational requirements for success. Without them, your raise won’t get off the ground. These three factors are sequential in nature: Equity campaigns that can’t master the first won’t need to bother with the rest.

1.Create a Clear and Compelling Business Value Proposition (VP)

A business’ value proposition is simply its reason to exist – the one thing it does better than anyone else in the world. The VP has to excite potential investors and inspire their confidence.If a business owner cannot define his or her proposed business’ value clearly and emphatically, the business stands a slim chance of success in raising capital.

A solid VP synchronizes the following elements:

  • A focused target market segment with substantial growth opportunities,
  • A business model that evinces defendable, sustainable profit margins,
  • A marketing and communication plan that creates and delivers value internally and externally,
  • Great management team and employees,
  • Scalable, affordable technology deployment.

The VP is the first prerequisite in a linear progression of a successful equity crowdfunding campaign. Without a clear and compelling VP, you might as well pack up and go home.

2. Define the Equity Strategy Itself

An equity crowdfunding campaign has many considerations that must be strategically designed for each business. While several factors are involved, the most important factors are:

  • How much money the business needs,
  • How far that money will take them,
  • What the business is worth and how much to give up to investors,
  • Which capital raise option to use.

A business owner may think $1 million will be sufficient, when actually, depending on his goals $1 million may not be enough to get to the next round of funding. By analyzing closely what the capital needs are, the right amount of capital can be identified and raised, and issuers can avoid underfinancing, which occurs far too often with initial capital raises.

In addition, each type of raise has different compliance issues that have to be managed and budgeted for. For example, in Georgia, a business pursuing an intrastate raise of up to $1 million is eligible to work with non-accredited investors, as many as it wants, realistically – whereas under Rule 506 D, a raise has no real dollar limit, and under Rule 506 C, the issuer may advertise the offering. The complexity and cost of compliance for each of these options varies significantly.

Other elements of an equity crowdfunding strategy include:

  • Finding a crowd to whom the business appeals,
  • Creating a compelling video presentation to attract investors and customers,
  • Providing transparent financials and a clear business plan,
  • Following all compliance rules regarding financial and information disclosure.

 3. Maintain Investor Relations After the Campaign

Few business owners at the start of their equity crowdfunding campaign consider the aftermath, but there remains plenty of work to be done once the capital is raised. Businesses must keep investors and shareholders appraised of their progress be it good news or bad news. In today’s world of instant communication, investors and customers can learn about how your business is doing through a dozen ways; let them hear it from you. Bad news don’t get better with age.

Maintaining transparent and honest communication with your investors isn’t just a good business practice; it can also help you raise money again in the future. Furthermore, investors can become consumers; contributing to the sales and profit of your business venture.

 

 

Equity Crowdfunding Utilizing General Solicitation: The SEC’s Approach is Good, but Georgia’s is Better

Written by Gene Wright. Posted in Uncategorized

For years, small-business owners in the early stages of development have complained about their lack of access to capital. The Jumpstart Our Business Start-Ups (JOBS) Act, enacted by Congress in April 2012, proposed to amend 80-year-old investment exemptions, creating one of the largest new capital markets of our time including online investing through equity crowdfunding.

California Agriculture Campaign Lands $800K in Equity Crowdfunding: Georgia Could Do That!

Written by Gene Wright. Posted in Uncategorized

This past February, crowdfunding platform AgFunder.com helped agricultural software manufacturer OnFarm raise $800,000 in just five weeks to expand its distributor network. Based in San Francisco and New York, AgFunder had an initial target of raising $400,000 through an equity crowdfunding campaign, but doubled that easily in just a little more than a month.

This venture is a fantastic idea: It gave a small business with a lucrative idea exposure to a much larger, more diverse, crowd of potential investors than would not have been possible through traditional channels. And it seems a natural fit to revitalize the agricultural sector, which is exactly what Georgia’s farming community needs.

When You’re Finished Raising Money, Don’t Forget to Do This

Written by Gene Wright. Posted in Funding/Lending

Plenty of small business owners invest months leading up to the launch of an equity crowdfunding campaign. But the work does not end with a successful raise: Maintaining effective ongoing communication with investors, customers and stakeholders long after the campaign has ended can not only prevent legal headaches, but can also become a competitive advantage.

2 Questions to Ask Yourself Before Launching an Equity Crowdfunding Campaign

Written by Gene Wright. Posted in Uncategorized

At the end of the day, the top consideration for an equity crowdfunding campaign comes down to one thing: capital. This can be broken down into two main factors:

1. How much does your business need to raise?


2. Which vehicle will you will use to raise it?

There is no “one size fits all” option for small businesses: how you raise capital will vary greatly based on your needs, what state you’re in and what compliance issues you must adhere to in raising capital.