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Equity funding raises cost more.

Usually at least $7k through to $50k depending on how much help you need and the quality of the handholding.

Why?

Because equity raises have to adhere to fairly specific regulation. There need to be warnings in your documentation and you have to have them checked so they dont misrepresent (read pump up) the opportunity. Lawyers and Accountants are usually involved but not at the level they are for an IPO.

One way to pay for an equity raise is to to do a rewards crowdfund raise first if it is applicable to your company. Not all opportunities are. If you have something you can easily physically post or digitally stream and it scores highly on the early adopter graph then it may work.

Here are some examples of the reasons businesses raised funds through rewards crowdfunding and are probably well placed to use equity crowdfunding for expansion capital.

  1. Use crowdfunding to validate the market. The innovator wanted to open a “Cat Cafe” in London, needed £108,000 to do it, but was unsure if there was enough interest. The campaign raised £109,510 in two months which validated the idea of opening a cat cafe where visitors will have the opportunity to kick back and relax with a cup of tea and spend time in the soothing company of our purring feline friends.
  2. Use crowdfunding to test a market. Canary pitched itself as the first smart home security device for everyone. Canary is a single device that contains an HD video camera and multiple sensors that track everything from motion, temperature and air quality to vibration, sound, and activity to help keep you, your family and your home safe. Unsure of the market the promoters pre-sold their units in a crowdfunding campaign with an initial sales goal of $100,000. The market responded with orders for over $1.9 million. Over 7000 units were sold. A very successful market test.
  3. Use crowdfunding to get extra promotion. Sometimes your sales may be confined to the market as you know it and need a wider audience.  Take the Robot Dragonfly for example. The dragonfly was developed at the Georgia Institute of Technology, as a joint effort between 20+ researchers, PhDs, professors and students from multiple universities across the world. Through their crowdfunding project they raised over $1.1 million and gained 3200 customers.
  4. Use crowdfunding to capture data. The Scanadu Scout is a personal scanner packed with sensors designed to read your vital signs and send them wirelessly to your smartphone in a few seconds, any time, anywhere. The device promotors used crowdfunding to target the consumer market but the backers they attracted, and the data generated by these backers, is certain to capture the attention and significant budgets of the medical industry around the world.
  5. Use crowdfunding to raise money or to match with grant or government funding. Sometimes it is about the money. This was the case when Tesla’s final laboratory came up for sale. A non-profit wanted to buy the property and turn it into a Nikola Tesla Museum. The property was listed at $1.6 million, and this non-profit would receive a matching grant from New York State of up to $850k if it raised the money.  33,253 contributed over $1.3 million and the building was saved.

Going down one of these paths could be your first step to an equity raise.

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by Paul Niederer

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English: Zach Braff at the 2010 Toronto Intern...

The Zach Braff crowdfunding video below is valuable if you are thinking of raising funds.

Zach Braff explains that successfully raising funds is a journey that often started long ago and is a result of regularly communicating with the people that choose to share your journey. Accumulating one million twitter fans doesn\’t happen overnight. Neither does creating something for them to be passionate about.

“Use them or lose them” is a loaded term but if you dont continually engage with your friends, family fans and followers by sharing updates in your area of passion like Zach Braff has done for ten years or so they will not be around when it is time for you to run your own crowdfunding campaign.

Some of the takeaways are as follows:

- Contributors gain meaning by supporting innovation and artists / creators they appreciate
- Web savy people see a raise wasnt an overnight success and the story and followers have been building for years
- People who follow Zach Braff know he continually engages his fans and followers
- This includes reading and responding to Twitter comments not just continually broadcasting crap
- Communications need to be a conversation not “check out my new makeup”
- Its not a monologue its a conversation and Zachs began engaging followers way back in the MySpace days
- Zach\’s been building followers for years through social media and had a blog back in 2004 for Garden State
- People are more isolated now in this age of social media
- In our lives, our work and our leisure there is less and less physical interaction with people
- Zach would have an equity raise in a second but he cant legally do that yet

 

Hundreds, if not thousands of hours have preceded Zach Braff\’s successful raise. Just as he has created his fan base and built his profile, those raising funds need to do the same. They need to build a profile or story for their entity, plus build a good team and engage with all their followers.

Long before the site goes live for the collection of contributions they need to ensure that significant time has been invested to ensure that there is energy, engagement and credibility in the raise.

 

 

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