Crowdfunding

0:03 Welcome to business purpose and Clarity with patreon your host we talk about startup live insights practical tips mistakes failures and everything between should you be doing it is it the right way for you to raise funds that's a really good question and only you can answer that one but I can try to give you some ideas I have done many crowd funding campaigns helping companies I mean oftentimes race them either just a regular crowd project like Kickstarter type of things where you selling pre-selling a product or selling a product and then also the crowd Equity part where you're actually raising funds and the characteristics of both of them are pretty much the same you have to do a lot of work beforehand you have to plan the thing you have to take care of the the boring stuff the legal stuff you have to take care of the obviously the story.

1:07 Uh what is it what do you want to sell how do you Market it how do you package it how do you make it appealing how do you make it fun how do you communicate it how do you plan to keep on communicating it or what a period of the total fundraising then it's the objectives also that's okay how much I'm planning to get money where the actual revenues or equity let's talk about crowdfunding in the sense of equity from this point forward but a lot of the points more or less may actually work for the crowd sales as well the funding amount what is the minimum that's what you need to figure out that you know if this I don't hit this one I don't do it then what is the maximum okay this is the total amount I'm willing to take and I don't want to take more if if you're really lucky and you know everything goes even above your expectations in case of valuation this is really important Point as well because if you putting too low valuation.

2:09 You over subscribed then it's not fun to say no if you could actually raise more money but you know you are diluting yourself too much so you have to really keep that in mind as well and on the other hand if you're not really getting too much money uh what is the minimum that you can work with that's something to to keep in mind and and then there's also these marketing aspects on it that maybe you can say that you already sort of Hit the threshold but you you are willing to take a little bit more you know because it's going so well and you know it's so much in demand and maybe that's just the part of the marketing and you're totally planning to do that beforehand already anyways when should you do crowd Equity I actually kind of like um the crowd Equity the fundraising in a way where there is no one or two big institutional investors where you need them to be on the same time and more or less in the same room and sign the.

3:12 Documents and then the deal is done because it's a lot of work it's a lot of effort it's a lot of things need to be in place in order for that to happen in a way less work to start to get investors in when you find them and take a smaller tickets and if the process is really smooth you have done the paperwork you have the things so more or less like hey well just this is the minimum amount and if you want to put just signing there sign up and send the money away and you're done this it also gives the leverage for you because then there's no like one or two parties who cannot even collude and start to bargain and do the hard fall ball gaining against you trying to squeeze in terms you are not comfortable with or putting the valuation down or whatever the usual VC bargaining is obviously you need to find some kind of lead investor so this doesn't go away you need to do marketing yourself crowd Equity if you're doing it.

4:15 With some kind of platforms they're not going to do the work for you you need to be able to Market you need to be able to sell your case you need to find the initial investors so usually you should have 30 percent of the total amount secured when you start to use these platforms if you're using because it's obviously also totally okay and you don't need to use any crowd Equity you can do it by yourself as well it's a probably a little bit more complicated requires a little bit more skill and planning to do it yourself but you can in most of the jurisdictions I'm talking about now EU you can do it yourself as well and that's uh I have also experience we have done it that way as well but anyways so you need to do the marketing initial marketing yourself uh you need prove the case you need to valuation your deal terms and you need to have that lead invested that that one who is willing to State their name more.

5:21 Or less that I'm behind this thing I'm already putting my money in and I'm recommending others to do the same and they have accepted the terms so if you're using some Cloud Equity platform or you do doing the crowd Equity thing that's usually how do you also then can sort that hey this person has already and they're totally okay with our terms so you just follow their lead and don't bother with the details too much obviously do your own DD but these are the terms and it's take take it or leave it situation more or less this is one way to do the crowd Equity fundraising so uh you find the 30 percent of the investors and then you go public and you do your thing not going too much in details how do you actually run it but uh that's basically the the gist of it 5 million is the amount you can raise nowadays in EU per year and the law has changed so if you're using some accredited uh approved.

6:26 Licensed platform so you can raise from all the EU countries that's my understanding I'm not a lawyer so there's no legal advice but there's also other possibility let's say that you take some VC money you take some investor money but the evaluation is pretty good so actually you could take a little bit of more money or you want to actually allow other people to join you so if you have really good b2c product and you have a loyal customers and you would like to reward them and make them like ambassadors for your project for your for your product for your company this would allow them to invest small amounts of money without having too much of a workload for you and difficulties with carboning and admin later on because oftentimes the capital doesn't take them in individually but they are pulled in together as one entity at least when when you do it with svps this special purpose vehicles um it's a lot of the or most of the.

7:31 Crowd Equity platforms are using so this way you can take small amount of money they can go into hundreds maybe even thousands of people and uh then you can have a nice way of reaching out having tiny um salespersons in a sense that you know they are probably not your employees well they are definitely not your employees but they are still waving your Flack and telling other people and doing referral sites for example for you if you haven't additional referral campaign but anyways uh digressing on the topic too much on these details but the idea that you can engage with the people you know who are already in your contacts but they're not the main investors they're not dropping uh tens or hundreds of case of investor monies but they could maybe put something in thousands or hundreds and it's still something you would love to get get them involved and and this is the way to do it so even if you have like let's say that you want to raise 2 million but you could take.

8:33 Three million you you have the 2 million VCS already maybe two investors they're dropping into two million together and and then you do the crowd Equity funding campaign as sort of a top up and also like uh formal fear of missing out type of way that you know if you were talking with the angel investors and they were like you know yeah I don't know you know it looks good but I don't know and now when you have already raced the VCS uh they are in then you can go back and say hey well you know I just want to check out that what you want to join because we are closing this round soon and as you see we're already having these big investors and we're getting you know we have already enough so you know in case you want to just put a little bit of money in there and don't miss out this opportunity here's your chance here's the link just do it and uh happy to take whatever you're willing to put in so this is something you can do as well as a side or as a like a Top-Up but not the biggest Pride already obviously you also you can also use the crowd equity in a way that you just do the silent.

9:37 Round and you don't want to have the big institutional investors and you just don't use any of that public aspect of it you it's like a private round and you just knocking on doors and taking insults or whoever persons you think are suitable for your case and you just pull them together without having anything except the lead that's totally fine as well and you can in most cases use these Cloud Equity platforms as well if you don't want to do the hassle yourself of collecting the money and doing all that paperwork yourself so these are some of the aspects of of the crowd funding but um I think the the biggest things are like is your products something which is easy to understand it's your company something which uh you know strangers would find appealing if you're doing something really hardcore P2P boring processes for some really obscure field maybe it's not the most appealing maybe it's not the the easiest story to tell so maybe one of them in those cases.

10:40 I think twice but if it's something really easy to understand for regular persons and you can make a nice story about it uh than crowd equities is obviously easier thing to do but it's always up to you the whichever way to do it but I in a way I'm really positive about having a more investors than just a few investors let's put it this way because I I think that gives more leverage for the founders to focus on the company and fulfilling they Mission but in some cases you may want to have some bigger investors or you need them so so this can be also a complimentary way of Rising fonts so these are just some quick comments and thoughts about crowdfunding I have been talking quite a lot about raising funds and doing different ways and what do you suit and what should you not do and and even how do you do continuous fundraising and different aspects and details of of this whole.

11:43 Process so check out the other stuff as well it's available in YouTube and in my blog posts and even this podcast and some other shape and form I've been doing over the years.