I just returned from the Empact Summit at the White House, where I had the honor of meeting some of the greatest entrepreneurial minds of our time. From key note speeches from AOL founder Steve Case, to meet and greets with emerging leaders in the technology and internet spaces, it was an incredibly motivating and inspiring experience.
It’s safe to say that I collected tons of insight into emerging business trends, and came away with a gamut of new friends and resources. However, the biggest personal takeaway I gained was something near and dear to my own industry. I realized that entrepreneurs just don’t seem to have a complete handle on the opportunities that have emerged with the passing of the JOBS Act, and are unaware of how they can leverage it to grow their businesses.
Moreover, during the 3 day summit on entrepreneurship, I talked to hundreds of business owners, and realized that most people had a completely skewed understanding of what equity crowdfunding really is.
When I asked people how they viewed crowdfunding, a majority of people I chatted with immediately defined it as “a messy collection of small amounts of money, contributed by a hoard of donors in exchange for a t-shirt or coffee mug”. Common phrases thrown around included “artists, “small money “, and “lots of investors”.
At the same time, I heard from almost every entrepreneur that they wished there was an easier way for them to connect with investors, and that they could have grown at a much faster rate had they had the right platform and connection tools.
Few people seemed to have a complete understanding about what crowdfunding can mean for the enterprise community, and how it can provide them with the vital connections they need to thrive. This came as a particular shock to me, because as a serial entrepreneur myself I know the challenge of courting and bringing on investors can be daunting and unwieldy- and have spent the last 8 years of my life seeking out ways to streamline this process.
I realized then that I needed to paint a clearer picture for entrepreneurs who are frustrated with the current investment landscape, and demystify what crowdfunding actually is and who can benefit from it.
Here’s a short explanation of what Crowdfunding Does and Doesn’t mean for Entrepreneurs:
It Doesn’t Mean Small Raises
Equity raises can be for up to $1MM per year. Even if you’re thinking of a large raise amount and looking for a large amount of money, equity crowdfunding could be a fit for you. Read on to see why.
It Doesn’t Really Require a Crowd
You don’t need a hoard of investors to have a successful fundraise. The fact is that there is no reason your funding cannot come from one person writing a $50,000 check, or five people writing a $10,000 check. You can set the minimum investment at whatever fits your business and network the best.
It Doesn’t Plant a Money Tree in Your Backyard
Lastly, money doesn’t just show up. When some people think of crowdfunding, they think that a leprechaun will show up and fund your deal. The most likely investors in your deal are going to be friends, family, and friends of friends. Raising funds can be easier with the right tools, but it will not be magic. Entrepreneurs who successfully raise money do so through creative, persistent, compelling marketing of their business.
What Crowdfunding Does Mean
It Does Mean You Can Leverage Your Personal Network- So Start Growing it Now
If you’re not well liked or you have a small network, raising funds in any format is going to be difficult for you. Over time, build and cultivate relationships by providing value to others. I’ll use the now-famous Harvey Mackay adage- think of networking like digging a well and letting it fill up with valuable contacts. You should start digging that well before you get thirsty.
It Does Mean You Can Use Friends and Family to Build Traction
Friends and family members have been funding entrepreneurs since the dawn of time. In fact, friends and family invest more than Angels and VC’s combined per year. This initial capital is critical to launching an mvp, building traction, and attracting professional capital.
It Does Mean You Can Catch The Eye of Angels- If Your Timing is Right
Every investor I know would love to have another way to improve deal flow and suss out quality deals more efficiently. Companies can catch the attention of angels by generating traction and getting customers prior to attempting to raise large amounts of capital. The more traction you can generate early on, the more likely investors will be to fund your deal.
At the end of the day, it’s up to each entrepreneur to decide if a rewards or equity crowdfund is a good fit for their business. If it is, with enough effort and the right network, it can be an incredibly powerful tool for growing a business and bringing great ideas to market.
Eric Corl, President: Eric has spent the last 8 years building companies that help entrepreneurs thrive. Eric has been a member of the founding teams of The Go Big Network and Idea Buyer, and currently serves as the President of Fundable.com.
Eric was recently inducted into the Empact 100 and recognized by the White House as one of the most influential entrepreneurs under 30Subscribe to the Podcast