Clinic: Startup Equity Crowdfunding
On June 25, Santa Cruz Works hosted an online clinic to explore the challenges and rewards of startup equity crowdfunding. Topics included 1) are you fundable, 2) what are the new funding opportunities, and 3) what strategies should you deploy. Krishan Arora / CEO of the Arora Project kicked off the event with Equity Crowdfunding 101. We heard the challenges, best practices, and success from local companies Everydae, Parallel Flight Technologies and Carnot Compression. Toby Corey lead a fireside chat. Recording below. Contact us at info@santacruzworks.org if you would like to know more or for panelist’s contact info. Also check out:
https://wefunder.com/parallel.flight.technologies
Christine’s blog post / guide for how she raised $1.26M! https://medium.com/@christineoutram/how-we-raised-1-29m-with-equity-crowdfunding-during-covid-19-f1a047de9c6d
Note: this article is a snapshot of “Equity Crowdfunding Will Revolutionize Fundraising For Startups” by Forbes. Learn more about funding in the Santa Cruz Works Online Clinic Startup Equity Financing on June 25, 2020.
If you are a startup, you know that funding can be a make it or break it moment in your business.
Even if you are successful once, there will likely be more times you will go back to seek additional funding. Typically, you have four options:
Friends and family
Venture capital or angel funding
Bank loan
Investing your own savings
If you are an early-stage entrepreneur, you might hit a few speed bumps or even dead ends trying to secure funding. Friends and family may not have the hundreds of thousands of dollars you need. Most angels and VCs will encourage you to return when you have a shipping MVP, hundreds of paying customer, and market viability. Banks will give you a soft rejection unless you have significant collateral. Any entrepreneur who has been through the funding fire does not get out without long lasting burns. Are there other options?
Equity crowd funding is becoming a strong viable option. In fact, it could disrupt the early-stage investing industry. There are three types: 1) Reg CF (“Regulation Crowdfunding”), Reg A, and Reg D. Let’s take a look at the most popular: Reg CF.
According to Forbes: “This avenue of fundraising is a complete game-changer for early-stage businesses that have a community built around them. Reg CF equity crowdfunding campaigns allow businesses to raise a maximum of $1,070,000 from unaccredited investors. This means your friends, family and anyone in your network can invest as little as a few hundred dollars directly into your startup. Now magnify this micro-investment across hundreds, or potentially thousands, of people and you can quickly amass a sizable funding round that can be obtained much more efficiently than other form of traditional fundraising.”
Venture Capital Investing for Everyone
Equity-based crowdfunding enable everyone to contribute, to invest, both accredited and unaccredited investors. it became legal in 2017 with the Jumpstart Our Business Startups Act (“JOBS Act”). It was designed to prime the entrepreneurial pump with seed investments. There are many equity crowdfunding platforms now available: StartEngine, SeedInvest, Indiegogo, InDemand, MicroVentures, and WeFunder.
Airbnd, Slack, Spotify, and many other companies got their businesses into gear with equity-based crowdfunding.
On June 25, Santa Cruz Works will host an online clinic to explore the challenges and rewards of startup equity crowdfunding: 1) are you fundable, 2) what are the new funding opportunities, and 3) what strategies should you deploy. We will hear the challenges, best practices, and success from local companies Everydae, Parallel Flight Technologies and Carnot Compression. Toby Corey will lead a discussion. Join us!