June 12, 2019

The Ideal Investor From A Stats Point Of View

 

Over the last few of these write-ups, we’ve looked at various aspects of crowdfunding offerings, from the trend in the size of offer minimums, firm valuations, how quickly firms reach their goals, etc. At times during these analyses, we’ve narrowed our focus in on various industries.

 

Today, as we read everywhere about Tech Unicorns and how technology is changing the way we do business (Drones! Automation! Robots!), we turn our focus more specifically to the firms in our dataset that fall under the Technology category. We’ll call it our “Technology Industry Profile” with a hypothetical tech company seeking to raise capital under Reg CF.

 

KC: What are you looking for from your Crowdfunding Offering?

 

Tech Company: Well ideally, I’m looking to raise, at a minimum, somewhere in the ballpark of $48,000 from potential investors, though we’re open to about $5,000 less given what we’re seeing across 2019 tech offerings. Ideally though, based on what we’re seeing in other offerings in our industry, we’d love to raise at least $167,000.

 

KC: Sounds like you’ve got some solid targets in mind. So what about investors? What kind of investor are you targeting?

 

Tech Company: Well I’ll tell you one thing, we’re looking for someone who is willing to do more than just the minimum. I know firms out there might only be asking for individual investments of around $250, but we’d love our investors to show a little confidence in us and invest a multiple of that…maybe 3x the minimum?

 

KC: OK, so far you’ve described an ideal offering as raising around $167,000 from about 200 investors. Anything else you’re looking for?

 

Tech Company: I guess you can have all these numbers in mind, but it also comes down to where you’re looking for your investors, right? Based on what we’re seeing in the chart below, we’re probably looking for someone who knows his or her way around StartEngine.

 

 

KC: Sounds like you have a type in mind. But what are you willing to offer your investors?

 

Tech Company: We’re willing to offer somewhere in the neighborhood of 12.5% of the company for their investment, based on average valuations we’ve seen around $11,600,000. We don’t want to give away the farm, but we’re willing to make it worth our investors’ time and investment. And have we mentioned, there’s usually some perks to go around.

 

KC: Anything else you’d like to say to your potential investors?

 

Tech Company: We know there’s a lot of options out there for our investors, but we’d love your investment and to be part of the 71% of tech companies in your sample that reach their target offering goal. We really like what companies like Eazl, SmartGurlz, and Keezel are doing, and would love to follow in their footsteps.


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About: John aland

John is an Accounting PhD candidate at the University of Michigan’s Ross School of Business. His research interests include crowdfunding, disclosure, and debt contracting. Prior to Michigan, he worked as an auditor at KPMG in Philadelphia for seven years, leaving the firm as an audit manager. John has a BS in Accountancy from the University of Notre Dame. He can be reached at alandj@umich.edu.

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