We love crowdfunding so much that we are walking our talk to crowdfund ourselves! We just launched our very own equity crowdfunding campaign so we can grow and you can own a little part of us (Anna’s elbow or perhaps my left knee).
Equity crowdfunding is a new thing for us, PledgeMe only got its license a few months ago. We’ve worked with over 40 companies on equity campaigns, with one currently raising. Now, we’re walking the talk, giving our crowd a chance to get involved, and to show anyone thinking about doing equity crowdfunding what they’d need to think about before embarking on this track.
So here are some thoughts about the things we’ve found tricky or had to do a bit of work on before going ahead with the campaign.
Valuation is a tricky one. There are so many models for figuring out valuations (from discounted cash flow to asset valuation to market comparatives to the Berkus method). We needed to make sure the valuation made sense to our crowd (from our Board straight down to Anna’s best friend). It’s got to give investors a good deal and at the same time ensure your company gets enough capital to see through its growth plans. That balance is hard to find. Over on his blog, Rowan Simpson offers some good advice:
“Try not to get bogged down in this, whether you’re an investor or a founder. At the end of the day neither side wins because they eked the last percentage point of dilution out of a funding round negotiation, they win by working together to build a fast-growing ass-kicking name-taking business.”
In that spirit, we see ourselves as a fast-growing ass-kicking name-taking business. Our share price and minimum buy are definitely in favour of attracting investment from our crowd, but is going to allow us to go mobile and expand our team to grow the business even faster. Check out our financials here.
Conversations with your Crowd
Anna leaned across the table to me, and in a casual tone asked “Would you invest in PledgeMe?”. The answer was of course yes.
I’ve been a long time supporter of PledgeMe and have seen heaps of friends get projects off the ground because of crowdfunding. Now working for the company and being a good friend of Anna’s, I want to invest in the company to help ensure its success and place in NZ’s vibrant crowdfunding scene. And, I want to be part of the upside if it comes.
No doubt each of you will have similar people around your company or idea. We recommend making a list of 50 people you think have the money or inclination to invest in your company and personally contact each of them. This can be a daunting project, but I can see Anna dutifully making her list now and starting to follow up with her crowd.
It’s a daunting prospect, but pulling in your crowd is absolutely essential. It ain’t crowdfunding otherwise!
Creating a pitch video
Even though I once starred in a 48 Film Festival film, PledgeMe didn’t have quite enough internal experience to patch together a pitch video. Luckily we had the support of our crowd. We called in the big guns with two times successful PledgeMe user Julia Campbell, and Ro Tierney a friend of our crowd. They helped us put together this slick video which clearly explains why you should invest in PledgeMe.
We recommend keeping your video short, definitely less than five minutes (if not less than 90 seconds) and only putting essential info in there to give your company a bright and cheery human face and show what you’ve done (over just telling in text). All the complicated stuff should be left for the business plan and financials.
Here’s how we laid out our pitch video when we planned it. We shared the plan with our team and commented / live edited / perfected the wording in Google Docs over a few days. You need to make sure your pitch isn’t too long, and that it sounds good when you speak it out. Then we created photoshop visuals for the film-maker based on the script, and listened to a lot of music on Audio Jungle.
On shoot day we went through the script one more time, ate pizza, and tidied our desks… And, our office chairs might never be the same again – Ro turned from film-maker into set dresser moving chairs, boxes, and potted plants to make sure the shots he took looked good (we’re still returning the chairs back to their owners – days later).
The real magic happened in the edit. Ro turned our ideas into reality, tweaked the visuals, and after a few drafts back and forth (in our Google Drive) we had our final video ready to upload to Youtube. Check it out:
We were in a tricky situation trying to crowdfund ourselves using our own platform. Luckily we negotiated through the FMA’s rules and have made it so we can run this campaign. This has meant Anna has had to step away from the campaign and crowdfunding consultant Kat Jenkins from Multitude has stepped up to run the campaign with support from our legal team at Buddle Findlay, Virtual CFO at Deloitte and the oversight of our independent Director, Anake Goodall. Also, people like me (aka “Associated Parties”) need to get formal approval to invest, and will get listed on the websites interest register.
While this is something you won’t have to think about, other areas of legal compliance regarding what to do with your new shareholders is something you should be taking into account. There are reporting requirements (annual, financial, and audit) as well rules for any company that has over 50 share parcels issued (The Takeovers Code). There are also certain instances where you’ll need a special resolution passed (eg. 75% of your shareholders voting yes). Most of this is just good company hygiene, but when your crowd is involved you want to make sure you’ve got your dry-cleaned suit and best perfume on.
What if it ALL fails!?
That dreaded thought that runs through everyone’s mind when they push ‘publish’ on a PledgeMe campaign.
We are incredibly optimistic that our campaign is going to go really well. We’ve got a huge crowd behind us, a solid track record of success, and wide networks of people who we know are ready to pledge.
In your case the best way you can ensure success is to make sure you activate your crowd and get them buzzing about investing in your company. That’s what we’ve done. So Anna, our board and I are just going to cross our fingers, take a deep breath and plunge into this campaign.
We’ll have Crowdfunding Crowdfunding: Episode II here soon.