New Zealand’s first equity crowdfunding campaigns went live a year ago.
In the last 12 months, we have seen over $12 million raised through 21 successful campaigns on the 4 registered and operating crowdfunding platforms. The overall success rate in our first year is 80% – twice that of rewards crowdfunding.
I thought it was it’s time to take stock. I invited representatives of the four operating equity crowdfunding platforms to find out what has contributed to their successes over the last 12 months.
We discussed business practices/stages, creating a campaign, promotion, and securing investors. This blog summarises the top tips that fell out of the evening.
The Panel
Josh Daniell
Head of Platform and Co-Founder of Snowball Effect. $8,473,302 successfully raised in the first 12 months through 8 successful raises. 88% success rate.
Will Stewart
Equity Champion at PledgeMe. $2,879,267 successfully raised in the first 12 months through 10 successful raises. 67% success rate.
Will Mahon-Heap
Country Manager (New Zealand) at Equitise. $666,300 successfully raised in the first 7 months through 2 successful raises. 100% success rate.
Leon Grandy
Representative from Crowdcube NZ. $379,700 successfully raised in the first month through 1 successful raise. 100% success rate.
1. Have a lead investor
All four platforms were in total agreement on this one: you need at least one lead investor who is willing to put in a significant sum.
That investor is likely to come from your immediate crowd, and securing them prior to going live will help your chances of overall success.
2. Use validation points to give investors confidence
Validation points include early investors, the quality of your board, your business practices, fan investment, and level of innovation.
The earlier stage you are, the more validation points you will need.
3. Have your house in order
You’ll need to have your governance structures in place, your constitution, a share register, financial forecasts, and a business plan.
The exact documents you need will depend on your platform.
Some of these things will cost you money. You should be prepared to pay for good advice and services if you want to do this right.
It’s also worth protecting your IP and patents prior to going live. Don’t be afraid to seek legal and accounting advice. Make an investment in your company’s future.
4. Know what it actually means for your business practices and decisions
The biggest hesitation I hear in my consultations is the idea of selling control of your company. Selling shares is not selling control. Control of the business lies with the directors – not the shareholders.
Most offers have been for ordinary shares. Shareholders get full voting rights on appointment of directors, whether to have an audit or not, and are able to put a motion to the AGM. There is a limitation on the number of votes held by each shareholder.
5. Have a quality campaign
Prepare for your campaign. Pay for a designer, have your financials prepared professionally. Get a professional videographer on board. All 4 platforms agreed that the video was the ‘hook’ for most investors and labelled it as a “critical” component of your campaign.
6. Get a valuation
Your company’s value is based on what people think you’re going to be worth in the future. It’s more than the cashflow, assets, or investment, it’s also about people’s belief in your governance structures, people, innovation, and story.
7. Communicate with your investors
There are legal minimum communications, and there are the extras that help build relationships with your crowd. There are communications you should do before you go live, and communications you should do after the campaign.
Will Stewart of PledgeMe pointed out that Yeastie Boys crowdsourced their campaign – asking for advice from their crowd along the way.
And Josh Daniell pitched in that Snowball Effect incorporate expected communications into their shareholder agreement – making ongoing communications a requirement.
8. Choose your platform well
Some platforms come with a pool of investors, and others ask you to bring your own.
If you want help with running an equity crowdfunding campaign, you should give Nathan over at Assemble Advisory a shout. He can provide the advice you need to choose the right platform, get your offer right, and raise money sooner!
