This guest post written by Jonny Price, Director of Business Development at Wefunder, was originally featured on Wefunder.
One of the most common questions I get from founders is “why run a Regulation Crowdfunding campaign vs. raise money through more conventional means?” My answer is basically twofold: Money and People.
From a Money perspective, Regulation Crowdfunding allows you to raise more money, by tapping into three new pools of capital — (1) accredited investors you know who aren’t yet ready to write a large check, but might write you a smaller one on Wefunder; (2) unaccredited investors in your network; and (3) Wefunder’s network of investors.
And from a People perspective, by running a Regulation Crowdfunding campaign, you can get a beautiful pitch of your company in front of hundreds of thousands of people (marketing!), and turn your existing customers into investors, and even more passionate ambassadors for your brand.
Up until the legal limit of $1.07M, most companies should be able to raise more money through a Regulation Crowdfunding campaign than through conventional means — for three reasons.
Firstly, there might be accredited investors you have been courting, who are not yet ready to write you a $100K check, but might be willing to come in with a $10K check on Wefunder, to stay in the loop and get in on the ground floor with you.
Secondly, conventional fundraising only allows you to raise money from rich people in your network (i.e. accredited investors). Regulation Crowdfunding allows you to raise the same money from accredited investors in your network (i.e. just have them invest in your Wefunder campaign, or have them invest in a concurrent 506(c) Reg D round), but also to raise money from “non-rich” people in your network (i.e. unaccredited investors). Conventional money comes from only 5% of the population, whom you must know personally. Regulation Crowdfunding allows 100% of the people who know you, and believe in your company, to invest.
Thirdly, running a Regulation Crowdfunding campaign allows you to raise money from people in our network. And we have a big, and rapidly growing one. There are now 180K users receiving weekly emails highlighting companies raising capital on Wefunder, and at least 10K of those are accredited investors. If you look at the hundreds of companies who have run successful Regulation Crowdfunding campaigns on Wefunder, roughly 50% of investment volume has come from the company’s own outreach, and our network has doubled that.
If you need to raise $500K, and you have five wealthy uncles (or know five interested angels) who can write you a check for $100K each, don’t run a Regulation Crowdfunding campaign. At least not for the Money (see the People section below…). But most founders don’t. So what if you’ve only got two wealthy uncles or angels? Enabling accredited investors in your network to invest in you more easily, tapping into unaccredited investors in your network, and the 180K users in the Wefunder network, can help you fill in the gaps.
Just as with the money, a Regulation Crowdfunding campaign enables you to get more value out of your existing network, as well as tap into our network.
Starting with your network, imagine you have an engaged customer. They really like your product, and they use it a lot right now. Now imagine that customer buys $1K of equity in your company. However engaged they were before, they are now significantly more engaged. If they were splitting their spending between you and a competitor before, they’re now spending it all with you. If they weren’t telling their friends about you before, they are now. You need to get the word out about a position you’re recruiting for? They will help you do it. Want to promote an awesome piece of PR you just got? They will share it. Turning customers into investors turns those customers into an army of supercharged champions and supporters.
As for our network, we’ll put your company in front of our 180K users. That in itself is valuable marketing. And many of our investors are not just wealthy potential customers, but they’re also well-connected, in your sector (or geographic location), and passionate about getting more involved with entrepreneurs and startups. We help them do that, and have investe d in community building software for that exact purpose.
Conventional (e.g. angel) investors are awesome, and will do useful things to help your business — for example, make valuable connections to potential large customers, or give you critical feedback on your product. Your Wefunder investors will do those things in droves.
Of course there are many pros and cons to running a Regulation Crowdfunding campaign, just as with any approach to fundraising. But those are the two big pros. 12 companies have now raised $1M on Wefunder, and benefited from the social capital that comes from recruiting hundreds of investors. Learn more at wefunder.com/raise_funds, or send us an email at firstname.lastname@example.org. If we don’t think Regulation Crowdfunding is the best approach for you, we promise we will tell you that.
Wall Street has Morningstar, S&P, and Bloomberg
The equity crowdfunding market has KingsCrowd.
About: Jonny Price
Jonny is originally from the UK, where he started his career in strategy consulting with Oliver Wyman. He has also spent time at non-profit Kiva.org as the Founder and Director of Kiva Zip, and joined Wefunder in early 2018 as Director of Business Development. Jonny also serves on the Board of Directors of AEO, and the Federal Reserve Board's Community Advisory Council. He has a degree in History from the University of Cambridge.