Look, this is a hard truth about raising capital, but it’s something founders need to understand: Most businesses never get a cent from venture capital, angel investors, private equity…you name it, odds are they ain’t buying. In fact, 75-80% of companies in the U.S. are financed solely with founders’ savings or money from friends and family. So, if you’re raising capital, it’s all but guaranteed that you’ll have to call up people in your network and, yes, ask for money.

Nearly everyone’s done it (including me)

This is the part where I usually see a lot of founders start to squirm. Hey, I get it. I began working for myself as a teenager because I wanted total freedom to do what I want with my life without asking anybody’s permission. But betting on yourself – and inviting others to come with you – well, that’s a whole different ball game.

You wouldn’t call Mark Zuckerberg a charity case, would you? He took a $100,000 loan from his father to start Facebook. Entrepreneurs from Jeff Bezos to Phil Knight and Michael Dell have done the same. They all leaned on their network to get things running because, however big their companies are now, you better believe that institutional capital wasn’t giving them a dime in the early days.

I’m not saying that pitching investors is especially fun or easy. If you’ve watched an episode of Shark Tank, you’ve seen it often isn’t – and it can be even harder when you’re pitching people you know personally. What I am saying though is that it’s necessary. And, if you’re not willing to make the uncomfortable call, it’s time to take your startup dreams behind the barn.

What’s true for friends and family is true for your community round

Since you’re reading this on StartEngine, I’ll wager you’re at least considering equity crowdfunding. So here’s some friendly advice: what attracted me to the space in the first place is it allows you to take your customers and turn them into shareholders. That has a way of making them very loyal to your brand, which can work wonders for your customer acquisition costs and lifetime value. But – and it’s a BIG but – that won’t do you a lick of good unless you actually pitch them.

I can’t tell you how many times I’ve read a newsletter from a founder, where they bury their own investment opportunity at the very bottom of the email. As an investor what that tells me is clearly they don’t believe in their business.

Take it from me, whether it’s friends and family – or a community round on a platform like StartEngine – there’s nothing to gain from being shy about your raise. After all, it’s not charity, it’s an investment opportunity.

Kevin O’Leary is a paid spokesperson for StartEngine. View the details here.

The post It’s Not Charity, It’s an Investment Opportunity appeared first on StartEngine.

Look, I’ve sat through thousands of pitches. Don’t believe me? This year, Shark Tank is going in its 15th season. Add to that the countless investment ideas I’ve heard for my own portfolio and the now 50 companies I’ve judged in StartEngine’s Quarterly Pitch Comp, and you get a sense of what I’m talking about.

Every company that gets funding from me does the same three things – not some of the time, all of the time. They articulate the opportunity in 90 seconds or less. They explain what’s so special about their team that can take this idea and execute on it. And finally, they know their numbers.

What’s true for your pitch is true for your online raise.

I’ve been preaching the three key elements of a startup pitch for years now because I believe in entrepreneurs and I want to see them succeed. So when I go onto equity crowdfunding sites like StartEngine, and I read offering pages that feel more like a bad novel than a tight pitch, it kills me inside. Odds are those founders will struggle to eek out even a modest sum – they certainly wouldn’t get a cent of my money.

So how can you take your startup pitch and turn it into an effective online raise? Never fear – as usual, your rich Uncle Kevin is here to explain.

1) You have three sentences to grab my attention.

Think 90 seconds is a short amount of time? Online, you need to explain the opportunity even faster. You don’t have the luxury of a captive audience here, so you need to do in the first three sentences – or less – what you normally would in the first minute-and-a-half of a pitch: 

• What do you do?
• Why does it work?
• Why is it such a huge opportunity?

Every founder’s first, second, and third job is sales. So if you can’t clearly explain the opportunity to me, as your future investor, how can I trust that you’ll explain it to customers? That means keep it short, cut the jargon, and put it in words a layperson can understand.

2) Tell me your relevant experience, not your entire CV.

Investors need to know what’s so special about you that you’re the person or team to execute on this opportunity – and that they shouldn’t look for someone else to do the job instead.

• Do you already have experience in this space?
• Have you tried a similar venture before?
• Show us that you have what it takes to persevere and go the distance.

If you have a personal connection to your product or service, now’s the time to share it. That tells me as the investor that you’re motivated and you won’t jump ship at the first roadblock. What I don’t want is a list of every job you and your team have ever held – to me that says you’re unfocused and you don’t know where to pour the gas.

3) Don’t make me hunt for your numbers.

In a pitch, when it comes time to get down to brass tacks and I ask a founder for their CAC/LTV ratio, gross margins, best acquisition channels, CAGR, you name it – I’m not looking for their life-story. Neither are prospective investors reading at your online raise.

Yes, there’s a time and place to share your story (as it relates to the business) – but remember this isn’t your e-commerce store, it’s an investment opportunity. So you should make it easy for me as the investor to understand the performance of your company. A simple way to do this: use bullets, put the numbers up front, and again, keep it short.

Still pre-revenue? That’s fine. Startup investors like me are looking for early stage businesses, but we still want to know the numbers. How many patents / years under development? What are the margins like for similar businesses? How big is the market?

If a founder can’t tell me their numbers, I make it a point to put them in hell in perpetuity – and smart investors will too. So don’t bury the numbers under paragraphs of text online, or your funding round is going to suffer.

Let’s just look at an example, shall we?

Wrong:

We believe the nexus of our expert team, paradigm-shifting IP, and omni-channel distribution strategy will make us the ultimate disruptors and ultimately lead to a CAGR of 200% over five years.

As far as I’m concerned someone should take this jargon-filled turd of a sentence behind the barn and shoot it. Here’s how you can say what I actually want to know as an investor:

Right:

• 20+ years – the combined experience of our team in the field
• 8 patents filed – and 4 more pending – protect our IP
• 10+ nationwide retailers – have agreed to distribute our product
• 200% – our projected CAGR over the next five years

No one said funding a startup is easy.

Starting as a young buckaroo businessman launching Softkey, I’ve been through the mill dozens of times. Trust me, I know it’s not easy to secure funding. My advice? Lean on the experts – folks like the team at StartEngine. All they do is think about the best ways to raise capital from the crowd and how to do it compliantly (not a simple feat). In the long run – when you’re, say, sitting on a giant pile of cash – you’ll be glad you followed their lead.

Kevin O’Leary is a paid spokesperson for StartEngine. View the details here.

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I can’t tell you how many times a founder has stood in front of me and asked for $100k, $200k, or even $300k in exchange for just 1% of their company. That’s an eight-figure post-money valuation. So unless you have at least $1 million in revenue and solid justification for a 10x multiple or better, you’d better believe I’ll put you in hell for it – and smart investors will too.

Need a refresh? Checkout our guide to startup valuations.

Overvaluing your company can hurt you in the long run.

Let’s just say for argument’s sake that you’re in the Seed Round and you’ve boondoggled your way into a $90 million valuation – i.e. the average valuation for a Series B. Now you collect a huge bag of cash and ride off into the sunset, right? Wrong.

If – and it’s a BIG if – you do manage to raise at such an overvalued price, you seriously risk your company’s sustainability in the future. Say other businesses in your vertical are selling at 4x annual revenue. At a $90 million valuation, that means you need to reach $22.5 million in sales or you’re looking at a down round at best. Odds are, in the seed stage, you’re not even close.

So what do you do? If you’re following the playbook of former unicorns like Uber and Airbnb, you’ll spend heavily on sales growth, then close your eyes and pray for profitability later. And maybe that could’ve worked two years ago, but now cash is king and companies that grow too big too fast are getting slaughtered.

But Mr. Wonderful – what about dilution, you ask?

My response: What about it? Most companies will undergo about 20% dilution in the Seed Round. But in my view, focusing on dilution is the wrong way of looking at things in the first place.

Let’s use easy numbers and say you raise $200,000 at a $1 million pre-money valuation. Your effective dilution is just over 16%, except now your company is worth $1.2 million – so your roughly 84% stake is still worth $1 million. In other words, yes you’re diluted but the value of what you own hasn’t changed.

More importantly, though, is what that extra capital unlocks for your business. And, if you set your valuation appropriately, you can deploy that capital toward sustainable growth. As my friend Howard Marks likes to say, “I would prefer a relatively smaller slice of a giant pie all day long.”

Investors from the crowd are in it for the long haul, so don’t treat them like a VC.

Look, investors from the crowd aren’t VCs. In fact, they tend to be the early adopters of your product or service, which makes them very sticky as shareholders. Unlike VCs, they don’t have a strict time horizon to liquidate either.

That stickiness can be very interesting for founders but it also means you don’t want to piss them off with an unrealistic valuation or unfair terms. So if your cap table already shows millions in preferred shares, don’t go short-shrifting your crowdfunding investors with common stock. As far as I’m concerned, do that and you don’t deserve another cent.

It’s not hard folks – do yourself and your business a favor, be smart about your valuation, and treat your investors right. In the long run, you’ll be glad you did.

Kevin O’Leary is a paid spokesperson for StartEngine. View the details here.

The post Don’t Get Greedy with Your Valuation, or Investors Like Me Will Put You in Hell for It appeared first on StartEngine.

There’s an old saying that bull markets are born in doubt and die in euphoria. Well, last year’s bull market went to slaughter with a near unprecedented 39x P/E multiple on the Nasdaq 100 index. Today, that multiple is down by nearly half, and it took out a lot of investors who were too naive to see warning signs in the valuations.

You may not like it, but investing is a cutthroat business. And whether you’re trading public securities or backing startups on platforms like StartEngine – if you don’t want to get wiped out, you need to understand valuation.

How much is what I’m buying really worth?

When a founder gets in front of me and says, “I want $200k in exchange for 5% of my company,” my first step is to work out the market capitalization. Basically, if 5% will cost me $200k, how much is the whole kit and caboodle? Well, 5% is a twentieth of the entire pie, so $200k X 20 = $4M post-money or including the value of my investment.

Ok, great – now I need to know why? Why is this idea they’re sitting on worth $4M? This is where smart investors start doing their homework. Don’t kid yourself, though – there’s no silver bullet for assessing valuation, but generally you want to look at some combination of the following factors:

• What’s the market cap? How many shares are outstanding and what’s the price per share? (Companies raising on StartEngine will list this in their offering circular).

• What are the revenue and market multiples? How many times greater is the valuation than revenues in say the past year – or projected revenues? How does this line up with other recent exits in the industry?

• How wide is the moat, and what’s the cost to duplicate? How expensive would it be for me to recreate this company from the ground up? What’s the value of their IP and other assets?

Now, you have to take into account where a company is in its life – especially in startup investing. Roughly speaking, nowadays a business in its Series A will have a valuation that’s about four times higher than in the Seed Round. So if a brand new company comes to me with a great pitch and terrific IP, I’ll listen – after all, I’m nothing if not reasonable. But if they claim they’re worth $60M (the average pre-money valuation of a Series A from the most recent reporting) with nothing to show for it, you can bet I’ll put them in hell in perpetuity.

Don’t be a sheep – lower valuations = more equity.

Here’s where a lot of investors go wrong: Today stock prices on public exchanges and valuations in private markets are generally down across the board. Many will sit on the sidelines and wait for the next market euphoria (and we know what happens then). But smart investors will see opportunity to seize equity – and that’s how you grow from a minnow to a shark.

Kevin O’Leary is a paid spokesperson for StartEngine. View the details here.

The post As an Investor, You Can’t Afford to Not Understand This appeared first on StartEngine.

Ho, ho! It’s Q4 and that means the holidays are right around the corner. I’ve always felt a little extra jolly when Howard and the team at StartEngine have filled me in on their end-of-year performance. But the holidays aren’t only a time to celebrate for Sharks, like me. If you’re a smart founder, you’ll recognize that this is the season when we investors have our wallets out – which also makes it one of the best times to launch your raise.

What’s Been Going on in Q4?

There may be an element of yuletide magic in the air, but the numbers don’t lie. Just take a look at the data from KingsCrowd*. In 2019, the equity crowdfunding industry added just over 80 new regulation crowdfunding offers in Q4 versus Q3. By 2020 and 2021, that number climbed to more than 200 new offers between Q3-Q4 of each year. So, not only has Q4 brought a bump to the industry for the last three straight years, the size of that bump has been growing.

Even more interesting for founders, though, is the end-of-year spike in dollars invested. Let’s go back to the numbers, shall we? In 2019 Reg. CF offers took home an extra $2 million between Q3-Q4; that Q3-Q4 difference grew to  $7.5 million in 2020 and a whopping $9 million in 2021.

By the way, in recent years that Q4 pop has been even more pronounced on StartEngine. In the last quarter of 2021, Howard and the team secured over $42 million in Reg. CF commitment – which means they outpaced the industry with a $10M+ spike between the third and fourth quarter. See why I get into the holiday spirit?

You don’t have to be a Shark to like trends that point up and to the right.

Year-end jumps in e-commerce are well documented. Think that doesn’t have anything to do with your raise? Think again. While it may not be a one-to-one correlation, more e-commerce means more people in front of their computers with credit cards at the ready. That’s not just holiday fairydust – that’s opportunity. And if you’re smart, you’d better be brainstorming ways to capitalize on it.

So, how should you join the holiday festivities?

Three words: market your raise. Pour gas on the fire with holiday-themed incentives and perks, and don’t forget to run ads. On equity crowdfunding, user acquisition and investor acquisition go hand-in-hand – you don’t want to miss out on the time of year when potential backers and customers are spending the most time online.

Chalk it up to a Q4 boost in e-commerce or a little holiday magic – either way, as far as I’m concerned, the end of the year may be one of the best times to launch a raise. So if you haven’t already, give yourself an early present and apply to raise.

*Source = https://kingscrowd.com/markets/. A KingsCrowd Edge subscription is required to access this report.  Kevin O’Leary is a paid spokesperson for StartEngine. View the details here.

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This might be painful to hear: but if you’re a founder, it’s time to kiss your dreams of a giant VC check goodbye. Why? In the best of times, funding through venture capital is no cakewalk. Now, the Nasdaq is down over 5000 points YTD, and venture firms are running for the hills. That means by and large they’re only doing inside rounds, and on the off chance you do get a terms sheet, well…it’ll make your eyes water.

Let’s step back and look at the market a year ago, shall we?

You can put away the rose-colored glasses. Whatever you may think, even at its peak, venture capital accounted for remarkably few funding rounds. In 2021, there were just over 1,200 successful venture-backed raises. Compare that to the more than 1.3 million small businesses formed in the US during that time, and you start to see what I’m talking about.

Let’s just say, though, that you were one of the lucky 1,200. So now you have your check, and la-dee-dah? Wrong. Odds are your new venture pals wanted a proprietary position on top of your shares (good luck explaining that to your early backers by the way). And maybe it took the form of preferred shares or a special liquidity covenant. That wasn’t necessarily the end of the world in 2021, but then the Nasdaq hadn’t dropped 5000 points yet, had it?

See, venture backing isn’t like getting a check from your rich uncle. VCs have strict time horizons – generally 36 months – and you’d better believe they’ll want to see a return on capital when time is up. Market downturn or not, if you’re not careful, you can find yourself pushed into a liquidity event before you’re ready.

Don’t Cede Control of Your Company

No doubt, you’ve heard me say: business is war – and it’s true. So why would you cede ground when it comes to something as important as control of your company? Well, many founders think it’s the only way to secure funding, but they’re dead wrong.

Enter equity crowdfunding. This is something I’ve been talking about for years because it lets you as the founder set the terms of the capital raise. No being bullied by a pair of golden handcuffs across the table. 

Say you go with the crowd to fund your seed round. On a regulation crowdfunding offer, you can raise up to $5 million – so it’s competitive against just about anything you’d get from a VC at this stage. You can also issue exclusively common shares. And on a platform like StartEngine, all those small investments (think $100, $200, $1,000) can appear as only one entry in your cap table. Basically, you set the terms of the game.

By the way, investors from the crowd tend to be your early customers. That means they like your product or service and want to see it succeed. So they’re more liable to take the long view than a venture partner.

Don’t mistake me – the venture route does work for some companies. But as a founder comparing funding sources, you have to look at the features and control provisions or you’re dead in the water. After all, sharks like me don’t start swimming unless the odds are slanted in our favor.

Kevin O’Leary is a paid spokesperson for StartEngine. View the details here.

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Did you ever wonder how I got to be, well, Mr. Wonderful in the first place? I can tell you it didn’t happen overnight. And although these days I’m famously always right, there were a lot of moments when I was starting out that it seemed like everything may crash and burn. But even as a young buckaroo founder, I never wasted a crisis. If you’re smart, you’ll take some lessons from this story, and you won’t either.

Starting SoftKey – a lesson from TV.

In 1986, I had just sold my first company, Special Events Television (SET). Now, SET worked primarily in sports broadcasting, and a major pain point for the industry back then was graphics. Remember this was before the days when you could design a logo on your tablet. At that time, graphics had to be created manually, in a very expensive process using a device called a plotter.

Did I have a solution? No. But after selling my company, I started taking night classes where I met a man named John Freeman. In his spare time, John did some computer programming, and he had created software that could run plotters automatically.

Step back and ask yourself: what do businesses do, fundamentally? They solve problems for people, and John’s software promised to solve a BIG problem for A LOT of people. So, I suggested we form a partnership – he would write code, and I would travel to plotter manufacturers to try to convince them to bundle our software with their product.

Crisis #1 – what to do when you don’t find the Holy Grail.

The first meeting I set was with Hewlett Packard. I was lucky to get it too because they were the largest plotter manufacturer in the world. If you’re thinking this is the part where I tell you I made a massive sale and la-dee-dah, you’re dead wrong.

They laughed me out of the room. And why shouldn’t they? After all, Hewlett Packard was number one – why would they burn margin to acquire market share when they already had a corner on the market?

Well, the Holy Grail isn’t the only cup in the world – so I pivoted and sold the software to Hewlett Packard’s competitors instead, and they ate it up. Why? By bundling our software with their product, all of a sudden the little guys had an edge over the number one player. And although we only made about ¢12 on each copy of our software, we sold millions of them.

Crisis #2 – you can learn a lot from cat food.

As the business took off, we got backing from outside investors (this was long before the days of Shark Tank or equity crowdfunding, but you’d better believe my pitch had the same three elements I expect to hear from any other founder). Eventually though, we had enough money to acquire and take the name of another software firm – The Learning Company.

After the acquisition, our product line was mainly centered around educational programming (think writing, reading, and math). But like every other software company at the time, we had a big problem: our development costs were through the roof and each program we published cost millions in R&D.

Now, years earlier when I was still a student, I had taken an internship for Nabisco working on their cat food line. Back then, Nabisco sold over 20 flavors of kitty chow. But did they have 20 individual recipes? Not at all. They had two – one with a chicken/beef base and the other with a tuna base. What they were actually doing to get all those flavors was adding extra ingredients at the very end of the manufacturing process.

The solution for The Learning Company: we had to streamline our cat food. You never know when a past experience will come in handy, and like a lightbulb, I realized the Learning Company needed to do for software what Nabisco had done for cat food. So, instead of developing each new software package from the ground up, we consolidated our product line into two platforms – one for reading and the other for math.

This drastically reduced our cost of capital. It also allowed us to start acquiring more firms, then sprinkle their products on top of our two platforms, much like the extra ingredients in Nabisco’s recipes.

Crisis #3 – keep your head on a swivel and know when to pivot.

In the early 90s, The Learning Company was selling its Reader Rabbit early reading program for around $129 retail. Sounds pricey? Yeah, it was – our margins were very attractive too. Keep in mind though, that at that point your typical desktop computer cost upwards of $3,000. That is of course until it didn’t.

Along came Michael Dell with a bold vision to sell PCs for less than $1,000. Suddenly, buying one of our programs meant spending over 10% of the price of your computer. You don’t have to be a Shark to see that we had a serious problem.

You can’t be blinded by success and you have to know when to pivot. We needed to change our pricing structure, but we didn’t want to torpedo our existing distribution channels. So I went on to the TV shopping network QVC and sold a package of five of our programs for just under $40. Think about that for a moment: from close to $130 for one unit to less than $40 for five – that’s an over 90% reduction in price.

The result? We sold out in minutes. We did more than that too – we also caught the attention of a buyer from Walmart, who placed an order for close to 12 million CD-ROMs at around $14 per unit. That purchase didn’t just change The Learning Company, it paved the way for the entire software industry to become commoditized. And the volume we started selling led us to a $4+ billion valuation by the end of the decade when we were bought out by Mattel.

The takeaways:

Nowadays, founders have all sorts of tools at their disposal that I didn’t have when I started. One that I’m particularly fond of is equity crowdfunding because it can help you grow your business while you acquire shareholders. That’s especially important to save time in the crucial early days. But it doesn’t change the fact that taking a company from your basement to a liquidity event is war – so make it easier on yourself where you can and learn from my story:

• Odds are Plan A is going to fail and you won’t find your Holy Grail. That’s when you get smart and start looking for other cups.
• Don’t discount your early experiences – they could lead to your cat-food moment and help make your idea a reality.
• Just because something is working now, doesn’t mean it always will; you have to know when to pivot.

Kevin O’Leary is a paid spokesperson for StartEngine. View the details here.

The post NEVER Waste a Crisis: 3 Moments That Led Me to a $4 Billion Exit appeared first on StartEngine.

What is investing, really? Is it going Spartan and rat-holing all your money away in bonds or on the market? Does it mean you have to deprive yourself of all luxuries until you hit retirement? I can’t tell you the number of times I’ve heard these questions, and my answer to the people asking them is always the same: you’re dead wrong.

Buying items that you love can be an investment.

Investing can mean a lot of things to a lot of people, and smart investors know to look out for assets that they’re passionate about and which make them happy. Me – I love watches. So do I go out to the mall and blow all my hard-earned cash on crap wristwatches that break after a year? I’d sooner burn in hell. Instead, I purchase collectors’ items. These are your Rolex, Patek, Audemar Piguet – I love them all. Why? Well, they make a statement when you walk into a room, and over time, they can appreciate in value.

This is a lesson I learned as a young boy from my mother Georgette. If you read my recent article on diversification, you know that every year she would save up to buy herself a Chanel coat. Now, did the coats make her feel elegant and beautiful? No question. But were they a frivolous expense? I think you know where I’m going with this – no way. Much like my watches, her coats were one-of-a-kind collectible items, and throughout her lifetime, they became incredibly valuable.

But Mr. Wonderful, what if I’m just getting started?

Don’t mistake me – investing requires discipline. And collectors’ items – which can run into tens or hundred of thousands of dollars and require significant expertise just to source – can often feel out of reach, particularly when you’re starting off. An entry-level Rolex Daytona, for instance, can cost upwards of $17k new. Now, their average resale value is over $30k*, so the returns can be very interesting. But for most people, that kind of purchase is simply not in the cards.

That’s why I’m so excited about platforms like StartEngine, which let you buy fractionalized shares of these items, often for as little as say $100. Growing up were you passionate about comic books or trading cards, or maybe like me, you love fine wines? Well, now you can invest in these collectible assets, many of which have outperformed the S&P 500*, without needing to pony up the big bucks and or develop special expertise to acquire them outright.

Remember my mother, Georgette – buying items, or shares of items, that you love isn’t frivolous. It’s an investment. And by the way, when you’re really passionate about something, that can give you an edge as an investor. So you don’t need to starve yourself to build wealth. The key is to stop buying crap and invest in items that will appreciate instead.

*Kevin O’Leary is a paid spokesperson for StartEngine. View the details here. Please note that these are historical returns, and do not reflect the value of or potential returns on any individual collectible.

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I’ve sat through hundreds, if not thousands of pitches. And 100% of the time, every company that winds up in my portfolio does the same three things: 1) they articulate the opportunity in 90 seconds or less; 2) they explain what it is about their team that can execute on this great idea; and 3) they know their numbers.

If you can’t do these three things well, I’ll put you in hell in perpetuity – and smart investors will too. But they’re just the start. The founders that really get my attention answer these questions on slide one of their pitch.

• What are your customer acquisition costs (CAC)?

• What is the lifetime value of your customers (LTV)?

Step back for a moment and ask yourself: what is the primary mission of any business? I don’t care if you’re launching the next Facebook or if you’re running a mortuary – eventually every company must be sustainable. That means, as a founder, you have to prove to me that you’ve found a roadmap for keeping this thing alive. And the way you do that is through your customer acquisition costs (CAC) and your lifetime value (LTV). 

If you can show me as the investor that you know something I don’t about acquiring customers cheaply or squeezing money out of them – that tells me you’re ready to pour gas on the fire. If you can’t, it’s probably time to take your idea behind the barn and shoot it.

Now, companies with a strong CAC / LTV ratio generally have significant brand equity. Does Colgate spend $200 per person to get you to buy their toothpaste? Of course not. People already know and love the brand. But that kind of following can take years to build, and as a founder, odds are you don’t have years to spend.

So how do you hack CAC / LTV and brand equity?

Turn your customers into shareholders and vice-versa. I’ve been talking about equity crowdfunding for years, and if you’ve read my recent article, you know that one of the key features is that it allows you to align your customers and your shareholders in a way that was never before possible.

Why? Well, when you raise through the crowd, two things happen:

1. You give early adopters an avenue to become even more invested in your business. This has a tendency to boost your lifetime value because now these backers have a financial interest in seeing your company succeed, which makes them very sticky customers.
2. You build brand ambassadors. Ask yourself: why invest in a business? Because you believe in the product and the mission – and usually you want to talk about it. I’ve seen time and again with companies in my own portfolio that their new investors from the crowd become some of their most vocal supporters. And that word-of-mouth is key for building brand equity and lowering acquisition costs.

So, if you want to stand out the next time you’re pitching to a Shark like me, know your numbers and be ready to wow them with your CAC / LTV – and don’t be afraid to lean on the crowd to get you there.

Kevin O’Leary is a paid spokesperson for StartEngine. View the details here.

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