How Startup Crowdfunding is Changing Forever
SEC updates to Reg CF restrictions + COVID19 is changing the fundraising landscape for tech startups — with our partners at 1World Online leading the path forward.
Renaissance of Equity Crowdfunding
Equity crowdfunding is still a relatively recent phenomenon, brought to life by the Obama-era JOBS Act (“Jumpstart Our Business Startups Act”) of 2012. This allowed for accredited online platforms to act as facilitators of equity investment opportunities between startups and non-accredited investors under Reg CF. These platforms include Republic, SeedInvest, StartEngine, and others.
Reg CF has since become the most viable path for startups to raise money from “average people” and has created opportunities for non-accredited investors to grow their wealth through equity opportunities. However, Reg CF is also known for its limitations, specifically its fundraising cap of $1,070,000.
Increased Offering Limits For Reg CF
As of March 4th, 2020, this appears to be changing—the SEC has proposed new rules to expand investment opportunities and improve access to capital in private markets, chief among them raising the offering limit in Regulation Crowdfunding from $1.07 million to $5 million.
As a startup consultant, the majority of my clients require capital in the realm of $1.5–4M to start building a team and get their product off the ground, and an equity crowdfund capped at $1.07M falls far short of those needs. Because of this, many startups have taken the traditional path of raising from VCs and private accredited investors, despite a desire to build an engaged community of users who are also invested in their products.
However, this news from the SEC is game-changing for startups seeking to raise capital in the near future, with the potential for a huge resurgence in the world of startup crowdfunding. If this new proposal is passed as anticipated, more startups than ever will choose the route of crowdfunding instead of seeking private capital, turning to platforms like Republic to connect with a broad community of smaller investors.
Fundraising in the Age of Coronavirus
Dramatic societal changes from COVID19 are also beginning to change the way businesses raise money this year. Without events and face-to-face meetings, startups will need to rely on crowdfunding platforms more than ever to introduce them to pools of eager investors.
Crowdfunding platforms, in turn, will need to facilitate more engagement between companies and investors by helping them host remote events and Q&A sessions and by allowing community members to provide feedback on new projects.
With this rise in online activities, there will also be a need for innovative marketing solutions that create engagement with prospective investors on all corners of the web, providing value that goes beyond typical Facebook, Google, and Twitter ad buying.
Republic and 1World Online are two major players leading the way in this evolving fundraising and marketing landscape.
Building an Ecosystem With 1World Online & Republic
My company, Sea Foam Media & Tech, has been partners with 1World Online since the summer of 2018.
I started Sea Foam by writing whitepapers for startups who are focused on emerging tech like blockchain and AI. These clients are typically early on in their journeys and looking to raise capital through a Seed or Series A. As we’ve expanded, we started offering a suite of services across communications, branding, and software development.
Interactive Marketing For Crowdfunding
1World Online is a unique digital marketing platform with a focus on the world of blockchain and tokenization, and they are a natural industry partner for us, filling an important need for our clients when they’re ready to start raising money and acquiring users. 1World’s interactive marketing campaigns show 10x typical conversion rates by serving users with engaging polls, quizzes, and debates alongside relevant articles. Once engaged, 1World directs users to a custom landing page where they can find out how to sign up or invest in a client’s offering.
Because many of our clients are looking for alternatives to advertising with Facebook and Google, platforms whose values they no longer agree with, 1World’s widgets are a powerful option we can recommend to fit those needs. 1World also has self-service offerings that integrate easily into our client workflows.
The Power of Joint Ventures
1World and Sea Foam have worked on multiple client accounts together over the years. Ever since CEO Alex Fedosseev and I began to collaborate, we have shared a vision for a holistic ecosystem of startups and service providers. When a startup client approaches a company for marketing and promotional services, they naturally need supplemental services, creating the opportunity for joint projects between partner providers and clients. When one company in the ecosystem is doing well, it has the ability to uplift others — a model we have proven together.
1World Crowdfund on Republic
With its own crowdfunding campaign launched on Republic on April 4th, 2020, 1World itself is now becoming a proof of concept for how startups can raise money in our changing world.
1World is deploying its own interactive marketing widgets to generate interest in their offering and is looking at Republic not just as a platform to facilitate their crowdfund, but as a partner. They hope their success can be used as a template and replicated for all other campaigns running on Republic. A partnership between 1World and Republic has the potential to uplift the entire ecosystem of startups, investors, and service providers, with all of these players creating value for one another.
Through the month of April, non-accredited investors can invest in 1World through Republic for amounts between $100 and $50,000 to become part of this growing ecosystem.
At Sea Foam, we’re looking forward to new joint ventures within 1World and Republic’s startup ecosystem as more companies take the route of crowdfunding to launch their big ideas.
