360° Coverage : Congratulations on Your Kickstarter Campaign...Now What?

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Congratulations on Your Kickstarter Campaign...Now What?

May 1 2014, 4:25pm CDT | by

More than 58,000 projects have successfully fundraised on Kickstarter since it launched in 2009. Not all of those projects turn into successful businesses post-Kickstarter, but many of them do and...

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13 weeks ago

Congratulations on Your Kickstarter Campaign...Now What?

May 1 2014, 4:25pm CDT | by

More than 58,000 projects have successfully fundraised on Kickstarter since it launched in 2009. Not all of those projects turn into successful businesses post-Kickstarter, but many of them do and often a couple years in, they realize they need to raise more funding. At that point, some return to Kickstarter, while others go the venture-capital route. Most founders would do well to consider accredited investor crowdfunding in that mix as well, but in some cases are frightened by either the formality of the phrase “accredited investor” or the informality of the word “crowdfunding.” Others simply don’t understand how accredited investor crowdfunding compares to other types of crowdfunding or venture capital, and whether their business is a strong fit for this style of fundraising.

With that in mind, following is a simple guide to determining whether accredited investor crowdfunding might be right for your company and, if so, how to go about doing it.

Is Accredited Investor Crowdfunding a Good Option for My Company?

Accredited investor crowdfunding isn’t a good fit for every business but, for companies at a particular point in their growth, it can work well. It may be a good option for your company if:

  • You need to raise substantial funds. You are looking to raise in the hundreds of thousands to a few million dollars.
  • You are looking for more than just capital. Equity tends to create incentives. Bringing in investors with relevant backgrounds may add value to your business far beyond just capital. Many investors can be, and have more incentive to become, brand ambassadors, to provide advice informally or formally, to make connections, and more.
  • The equity story is more compelling than pre-orders for your product. Not all companies or products are a good fit for a donation-based platform. For example, Klymit, an outdoor apparel company, has a compelling story for equity investors, but might find it difficult to convince individuals to donate money in exchange for future product as those individuals can just as easily find access to the full line of apparel through Klymit’s website.
  • You have reached a certain level of scale or profitability. At some point, it becomes difficult to convince individuals that a small product pre-order through Kickstarter makes financial sense.
  • Your local network of investors is not as vast or relevant as you would like. Assuming the platform of choice has the right network for your company (based on your industry, etc.), you may reach a broader group of investors and can increase your focus on relevance as opposed to location.

I’ve Already Raised on Kickstarter, What Do I Do Now? 

Accredited investor crowdfunding platforms can be a good next step for businesses that have raised successfully on Kickstarter and are looking for their next infusion of cash. Here’s why you might want to consider a crowdfunding-for-equity platform if you’ve successfully raised on Kickstarter:

  • You already have experience communicating your story. You’ve already successfully engaged investors through an online platform. You can leverage that experience in communicating with investors again.
  • You have reached greater than $500K in annual sales. Your company is beyond proof of concept, and you’re looking to raise a larger amount of capital to take the business through the next stage of growth.
  • You would like new advisors. You are interested in bringing in some sophisticated, value-add partners to the table in exchange for equity in your business.
  • You want to generate some buzz around your company while bringing in new investors. We have seen some great PR stories for companies that are raising capital through online platforms. These provide companies great exposure and help build brand awareness. Some examples of press include articles in Fast Company and The Wall Street Journal.

I Think Accredited Investor Crowdfunding Is Right For Me, But How Do I Do It?

You’ll need to pull together a few more solid financial documentation and business plans than would be required of you on Kickstarter. Here’s what you should prepare if you’re thinking about applying to an accredited investor crowdfunding platform:

  • Know the Details of Your Business. Be prepared to speak intelligently about all aspects of your business including the addressable market, financial results, growth prospects, potential acquirers, etc.
  • Historical financials. You’ll need financials from typically the last 2 years or, for younger companies, since inception. It may not be required that these financials be audited or reviewed.
  • Projected financials. Investors want to understand where the business is headed over the next few years and where the opportunities for growth lie.
  • Planned uses of capital. The amount you are looking to raise and the respective uses for it (e.g. inventory purchases, marketing, team hires, etc.).
  • Valuation expectations. Expectations here should be in-line with the market for companies in the same sector and of similar size, growth, margin structure, etc.
  • Transaction documents. Ahead of the actual raise (not necessarily ahead of applying), companies will need their transaction documents whether it is just a Term Sheet to solicit commitments or full documentation (Stock Purchase Agreement or Convertible Note Agreement depending on the desired structure of the offering, as well as the company’s Operating Agreement or Investor Rights Agreement). At CircleUp, we offer standard templates companies can use to start this process. Of course, these documents need to be tailored to your individual offering and product.
  • A good attorney. Finally, you’ll want to consult an attorney with private placement experience.

Hopefully this information has helped you determine if now is a good time for your company to apply to an accredited investor crowdfunding site or if this might be an option you’ll pursue in the future. Either way, we celebrate small business successes and wish your business the best.

 
Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was told ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into by ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammudd ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

8 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

8 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year invol ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

8 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Baza ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

8 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway (Kidex) tod ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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