At Northstar Consulting, we look for situations where capital sought will help the business owner successfully fund a project or social cause or take their company to the next level and materially increase its value. In the case of companies looking to ‘tap the crowd’ for debt or equity, this means the potential for high growth, a strong market position, and a sustainable competitive advantage.
Currently, Georgia based businesses can raise capital (up to $1 million per year) from other Georgia residents in intrastate transactions. Equity crowdfunding is legal in Georgia. Yes, legal. The Invest Georgia Exemption is not the JOBS Act. It’s better than the JOBS Act. On December 8, 2011, the Georgia State Securities Division promulgated new rules known as the Invest Georgia Exemption (IGE). This legislation will open the door to many funding platforms like Georgia based Sterling Funder, Rebirth Financial, SparkMarket, and URUUT, which are similar to Kickstarter, along with perhaps thousands of businesses who have been hoping to participate in this new alternative financing opportunity.
Several clients have asked us what they can do now to prepare to ‘tap the crowd’, and our basic cornerstone advice hasn’t changed materially from what investors look for in early stage businesses. Several of the most important factors that will strengthen a company’s position:
- A complete, compelling, and well-articulated business plan with a strategy for how the business will capture and defend its market share.
- A market opportunity large enough to create and grow a business for significant annual revenues.
- A strong preference to be “in-revenue”.
- Strong management with relevant and successful experience.
- An entrepreneur that has made a significant personal investment in the business.
- A company with the potential to make a significant impact on the local economy through job creation, direct investment, or other economic benefits.
- An understanding of the company’s valuation and how it fits with an investor’s risk/reward expectations and exit strategy.
- A desire for advice and coaching.
The two biggest misconceptions about crowdfunding we hear are, “Is there a quick and easy success formula?” (NO, it does not exist; we’re still learning what works and what doesn’t), and, “Since we don’t have to use banks and investment funds to fund our business, it’s FREE isn’t it”? (NO, there is a cost to learn how to create, manage, and successfully execute a crowdfunding initiative, although the cost can vary significantly with the type of campaign, i.e., reward and donation campaigns are cheapest, and the amount of money required launching a $1 million dollar equity offering under IGE is much less than ever before.)
On October 12, 2013, the Georgia Crowdfunding Association (GCA), The Richards School of Business at the University of West Georgia (UWG), and Carroll Tomorrow will host a full day of seminars, workshops and networking opportunities to help the entire Georgia Crowdfunding ecosystem connect and learn more about the dynamics of Crowdfunding. I would urge anyone interested in how Crowdfunding really works to attend this unique, hands-on learning opportunity. Visit www.crowdwest.org to learn more and register today.
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