What to expect when you’re expecting an equity crowdfunding round
You like the idea of equity crowdfunding but what is it actually like to do a campaign?
We do this all the time so we thought we’d go fully transparent and write it down for you.
This article outlines the whole end-to-end process and let you know the role that a crowdfunding platform plays in making it all happen.
Stage 1: Preparing for a campaign
Choose a crowdfunding platform and get yo’self educated
Choosing a crowdfunding platform is like choosing a Tejo coach. No one you know has ever played Tejo, you have no idea what makes a good coach, and most of the coaches speak a different language. There’s no right way to do it but given the small number of options in Australia, it’s worth doing your research.
While you’re doing that research, make sure you learn about equity crowdfunding in general.
It’s important to understand the requirements that the government has around equity crowdfunding. You’ll also need to get a good understanding of what an equity crowdfunding campaign would actually mean for your company (reading this article is a great start!)
If you’re super serious, we recommend giving ASIC’s Crowd-sourced funding: Guide for companies a read. It’s not particularly riveting but it’s the bible for doing this in Australia.
A note about crowdfunding platforms (just in case):
They are just the middle man between you and your investors.
They aren’t a bank.
They aren’t going to make sure you submit your reports (that’s ASIC).
They do host your campaign.
They do process and collect the money that people have pledged if the campaign is successful.
And in our case, we do help you plan and pull off your campaign.
Prepare the documents
The main document you have to prepare is the crowd-sourced funding (CSF) offer document. This document will include, at minimum:
- Company details — name, ACN, company type, address
- Details of any criminal and civil legal actions against your company
- A description of your company’s business and organisational structure
- Capital structure
- Directors and senior managers
- Key risks
- Financial information — financial statements for the most recent financial year prepared in accordance with the accounting standards
Want more of the nitty gritty? Check out an offer document that Food Connect Shed used for their campaign.
Note: unless you have the knowledge in house, this bit will require accountants, lawyers, and business advisors. There’s a lot of stuff you can bootstrap but be prepared to pay.
Once consents are given, the document will be handed to the crowdfunding platform you’ll be working with. They’ll conduct a number of checks on the document, as well as your company and its officers.
Prepare your crowd
Maybe you’re sure that people will be opening up their wallets when you put the offer out there. But just in case they don’t, here’s what we usually suggest to people:
Figure out who your crowd is. It might be customers, people in your networks, or organisations who have supported your business in the past. It might be friends and family of the founders. Make a list of your first 50.
Even if they love you, they’re probably used to being asked to buy products, not bits of the company. Organise coffees, calls, gatherings. At the very least, shoot them a personalised email giving them a heads up about what you’re thinking of doing, why, what the money is going to be used for, and how they’ll benefit. Get them to agree to pledge and share when the campaign goes live.
Do. This. Early.
You want to do this before the campaign starts.
If you have people who like you but don’t quite love you… get in touch with them to, but more as an FYI rather than an ask. That way they won’t be surprised if you’re sending out campaign updates once it’s going.
If you have channels that you don’t often use, make sure you up your activity ahead of the campaign so that it’s not so jarring when the campaign starts. (Imagine not hearing from your auntie ever and then suddenly it’s weekly text messages asking if you’ll send her some money. Don’t be that auntie. It wouldn’t have been so weird if she was messaging you regularly and then one day happened to ask.)
Put together your pitch
Do the text pitch first. Keep it simple but thorough. Someone who reads it should know:
- who you are
- what you do
- why you do what you do
- why you’re asking for $$
- what you’ll do with the money
Write at grade 5. Don’t assume they know anything about you.
Break up the text with images but make sure the images mean something.
When you do the video pitch, plan it before you film it! We’re big fans of winging things but this isn’t one of those things.
We reckon 90 seconds is perfect. Keep the script clean and simple. Make sure the sound quality is good. Use pros if you can afford it.
Note: a normal day rate for a decent film maker is ~$1000 (about the same for a good copywriter)
Promo the campaign
Don’t wait until the campaign kicks off to promo it. Instead, make sure people are ready to jump on it as soon as it drops. Announce your campaign before it starts
As well as your conversations with your first 50, put it out through your social media channels, newsletters, and through those of your supporters.
There are heaps of ways you can do this:
- write a blog post
- publish a press release
- do a Facebook live
- organise a launch party
- do an info session or a webinar
- send suggested content for people to share
Stage 2: During the campaign
Publish the offer
On the agreed date, the crowdfunding platform will publish the offer. It will look something like this.
This means that people can now start pledging.
Ideally, you’ll have a plan of how you’re going to do this, as well as existing channels to a captive audience.
As soon as the offer is published, make the announcement.
When people start pledging, ask them to share the word.
Continue consistent messaging towards your existing crowd and your existing channels.
Close the offer
The offer will close because you’ve either hit your maximum subscription or reached the expiration of the campaign (3 months is the longest they can go for).
If you haven’t reached your minimum subscription, the crowdfunding platform will declare the offer unsuccessful. It’s important to note that none of the pledges made during an unsuccessful campaign are collected. (This is why promotion is so important!)
Stage 3: After the campaign
Wait a bit
The offer is not officially “complete” until the five-day cooling-off period for retail investors has expired.
Issue shares and receive investor money
This is mostly admin. The crowdfunding platform verifies investors and processes payments, you issue the shares and the crowdfunding platform sends you the investment.
Maintain reporting requirements and keep your crowd up to date
Reporting requirements differ if you’re a public or proprietary company, as well as if you’re a large or small proprietary company. Best to peruse ye olde ASIC’s Crowd-sourced funding: Guide for companies for the key details.
It’s not just what you have to report according to regulations though. The crowd that invested in you is interested to know how things are going. Keep in touch with them. Bring them along for the journey.
The importance of choosing a great platform
The crowdfunding platform will have a massive influence on your campaign.
In Australia, there are a number of hoops to jump through to become an equity crowdfunding platform. This means that there aren’t that many options. Shop around. Figure out what your gaps are and what you’ll need help with. Different platforms have different strengths.
Want to read about how we do it? Check out what it’s like to prepare for an equity crowdfunding campaign with PledgeMe.
For us, we’ve been doing crowdfunding since 2011 and we’ve been doing equity crowdfunding across the ditch since before it was legal in Australia. We are really great at helping companies that already have a crowd.