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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.

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Here’s what he had to say…

Q: In a sentence, could you describe what Innovative Eyewear does?

A: We develop, manufacture, and sell smart eyewear products and companion software. Our goal as a company is to really create the first mass market smart eyewear product that’s suitable for all-day prescription use.

Q: As you know, founders have a lot of options when it comes to where and how to raise capital. Why did you choose to do a regulation crowdfunding round and why did you choose to partner with StartEngine?

A: Absolutely. Our product is a consumer product, not a B2B product. It’s meant for regular eyeglass consumers and crowdfunding was identified early on as a great way to involve consumers in the development of the product – not just in helping fund it, but also really informing the use cases, the feature set, and styles of glasses. So, it was a useful exercise and about 4,000 people joined our first StartEngine campaign.

They really contributed to the development of the product in numerous ways – from funding the actual R&D, to participating in surveys and focus groups on different styles of glasses. This informed our manufacturing and overall direction. It was an all-around great experience that helped us develop this product, which is in a new category. There wasn’t a whole lot to go on out there in terms of what direction we should take the product in. The main impetus for doing a crowdfunding campaign was to build a community around what we were doing and use that community’s insights to build a better product.

Q: You mentioned involving your community investors in some of the R&D. How did you collect info from the investors and how did that relationship develop?

A: As part of the campaign, we offered a free pair of glasses to anyone who invested $500 or more, so many of the people that participated in the campaign received the product once it was available. This allowed us to gather a lot of information based on those initial deployments from the free pairs that we gave out as part of the crowdfund. It was a useful tactic to get the glasses into hundreds of people’s hands immediately after the product was available.

Q: Can you speak a little about your experience working with the StartEngine team?

A: The awesome landing page we put together with StartEngine gave us our first true investment vehicle for people to come and join our mission. This made microcap investments very digestible and appealing to the average retail investor.

StartEngine, among all the crowdfunding platforms we evaluated, was the best at productizing the investment opportunity and turning it into an attractive, digestible package. Someone could spend 20-30 minutes going through the landing page, reading some of the filings, and have a solid grasp of what the company is all about – where we’re going and what we’re doing. The platform tied together the team, the tech, and the story, which I believe are the three most important things when it comes to a crowdfund. StartEngine, in our view, does this better than anyone else.

Q: As you know, launching a regulation crowdfunding offer is still a substantial undertaking. Could you elaborate more on that?

A: There are benefits and caveats to consider. As you said, it is a heavy lift. It requires significant team resources to manage and start a campaign – to create it, market it, and respond to comments. On the other hand, there’s a major benefit in that the advertising for your crowdfund also attracts regular customers to your product. So, the ad dollars you’re spending to drive traffic to your campaign count double, especially if you have a live product. We did, and the campaign drove sales of our existing products. That was a benefit we saw by already having a live product when we started.

Another major benefit is that it really unifies the company because it aligns everyone on the vision. Much of that is due to the landing page. But it also crystallizes the founders’ ideas into a clear path forward for the company. Before the crowdfund, everything was nebulous and different executives had varying visions about where we were going and what we were trying to achieve. But the crowdfund forced us to put our goals and benchmarks on paper and hold ourselves accountable to them, to do justice by our crowdfund community.

Q: A lot of founders are hesitant to share their financials prior to a community round. Was that a concern for you? If so, how did you overcome that?

A: We always planned to go public at some point. So, we understood early on the need for excellent documentation on the company, to have all our filings in line, and so forth. In many ways, going live on the Reg CF was like a Little League IPO. It has a lot of the light version of requirements you’d see for an IPO, like Form C filings and so on. So, it was a great exercise for us because it prepared us for what it’s like to go public. This was really a leg up to help us get to our long-term goal, as the process is very similar to a junior IPO.

Join Harrison and over 1,000 founders who’ve completed successful funding rounds on StartEngine. Apply today.

Q: What was the transition like going from ending your community round to preparing for your IPO?

A: Well, things are a little bit different for us as a tech company. Our focus is on tech hardware and software. The transition involved relentless R&D. What enabled us to go public was this critical mass of technology that we had built in the company…No one player dominates this emerging and contested field of tech hardware yet, but that’s what we’re trying to do. We’re competing against a lot of multibillion-dollar tech companies in this space.

After we raised the initial capital on StartEngine, we developed a significant upgrade to our core product line, the Lucyd Lyte® glasses…Though the revenue for a public company was not very high, the R&D we accomplished, the product development, and a few other things we did, helped kick off the IPO.

The initial community we built was instrumental in this whole process, providing product feedback and helping us get the product to a point where it could go fully mass market. Our newest models, which launched three months ago, are best in class, and this can be traced back to the initial product development through the crowdfund. Essentially, it allowed us to kickstart the R&D in a big way and develop this technology that gives us a unique competitive advantage.

Q: Could you expand on how the new model of the Lucyd glasses is differentiated from prior models? Were there any examples of input from your crowdfunding investors that drove the ultimate design?

A: Yes, absolutely. The model we launched after the crowdfund was groundbreaking. It was closer to a normal pair of glasses than any other smart eyewear on the market at the time. A couple of groundbreaking things about the Lyte 1.0 were that we achieved a one-ounce weight for the glasses, on par with traditional eyewear, and about seven hours of music playback per charge, which was longer than most other smart glasses. But the most significant improvement was the style upgrade – it was lighter and looked better than other smart glasses.

Feedback from our crowdfunders made it clear that people wanted smart glasses that look like trending styles in traditional eyewear. This informed our product’s style over the last few years. Our most popular product is just a black wayfarer. It looks good on men, women, young people, and older people. It’s a style that works well in the American market. Despite suggestions from my European team members for more avant-garde styles, I’ve found that Americans prefer simpler styles that go with every outfit.

This insight was born from the crowdfund where we essentially had a focus group of thousands of people at once. We put up a standard-looking aviator with smart features, and people were instantly interested. So, we manufactured it and brought it to market.

The crowd fund community greatly helped inform the product development. One of the biggest issues in smart eyewear is that most products are being designed by consumer electronics teams who know little about eyeglasses. A great pair of smart glasses starts with great optics. If you don’t have a good foundation, the product dies in the market.

Q: As a closing question, do you have any advice for first-timers in the space of crowdfunding?

A: Firstly, you have to be sure you want to do this because once you start, you have to go full bore. The whole team has to be on board and push it forward. Secondly, have a great product in the works, a great team, and a great story about how you’re different. Be willing to go the distance with your crowdfunders as they will want ongoing support and information about how things are going. Lastly, assess your resources before you start, as crowdfunding requires more resources than, say, Kickstarter. Have some energy and capital to get started, and with the right team, tech, and story, it should work out.

Want to raise your own round of capital?

Or, even if you’re still on the fence, apply today to speak with one of our fundraising specialists about how we can support your business.

*This testimonial may not be representative of the experience of other issuers and is not a guarantee of future performance or success.

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The Topline

Equity crowdfunding publication KingsCrowd has released the May numbers, and funds raised under Regulation Crowdfunding (Reg. CF) reached $23.7M for the month. Meanwhile, offers under Regulation A+ (Reg. A+) accounted for another $4.2M raised, bringing the industry total for equity deals to $27.9M.*

What’s the difference between Reg. CF & Reg. A+?

How did StartEngine fare, you ask?

Between Reg. CF & Reg A+ combined, $12.6M was raised on our platform last month – close to half of the industry total.** Compared to runners up Wefunder and Republic, well, we’ll let the numbers speak for themselves…

May 2023 Funding Totals via Reg. CF & Reg A+ Combined*

Founders We’re Celebrating (look out in your inbox)***

Equity crowdfunding is famously, well…all about the crowd. That’s why each month, we recognize founders who go above and beyond to help us grow our community – or crowd – of investors through our “Hot Off the Press” and “Crowd Pick” awards.

“Hot Off the Press” Winners May

For bringing 100 first-time investors to StartEngine.

• Allergenis … awarded May 12
• DoneGood … awarded May 13
• Drink Monday … awarded May 17
• Yéyo Tequila … awarded May 20
• Truffle Shuffle … awarded May 31

“Crowd Pick” Winners May

For bringing 300 first-time investors to StartEngine.

• Blackout Coffee … awarded May 19
• Pashion Footwear … awarded May 25

*Source: https://kingscrowd.com/markets/. Please note a KingsCrowd Edge Subscription is required to access this report.

**Includes funds raised via Reg. CF and Reg. A+ combined through StartEngine’s funding portal and broker-dealer, as well as StartEngine’s own raise.

***Why am I seeing these companies? Review how StartEngine promotes offerings here. These Reg CF offerings are made available through StartEngine Capital, LLC. These investments are speculative, illiquid, and involves a high degree of risk, including the possible loss of your entire investment.

****See details here.

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The Topline

According to equity crowdfunding publication KingsCrowd, funds raised under Regulation Crowdfunding (Reg. CF) hit $37.2 million in April, a 35% jump from the month prior. Combined with Regulation A+ (Reg. A+), industry totals reached $43.3 million to kick off Q2.¹

What’s the difference between Reg. CF & Reg. A+?

As for StartEngine, funds raised under Reg. CF & A+ combined on our platform reached $11 million in April, or just over 25% of the industry total.² It’s a big slice of the pie, but then again, we’re celebrating…

$700 Million Raised on StartEngine²

In the first week of April, StartEngine officially crossed $700 million in lifetime funding on our platform. It’s a, well…huge number, but it also reflects a recent acceleration in crowdfunding. 

Case in point: it took us six years to raise our first $500 million and less than 18 months to raise $200 million more. If that trend continues, $1 billion may be closer on the horizon than you might think.

Founders We’re Celebrating (look out in your inbox)³

Equity crowdfunding is famously, well…all about the crowd. That’s why each month, we recognize founders who go above and beyond to help us grow our community – or crowd – of investors through our “Hot Off the Press” award.

“Hot Off the Press” Winners April

For bringing 100 first-time investors to StartEngine.

• Earth Robotics … awarded April 15
• Uncanny … awarded April 18
• Pashion Footwear … awarded April 22
• Hercules Mulligan … awarded April 25
• PittMoss … awarded April 28
• Hexact … awarded April 29

Where Will Venture Funding Bottom Out?

The latest reporting from Crunchbase found that the decline in venture funding may in fact be speeding up. According to the publication, global VC activity fell 53% YoY in Q1, but the April numbers are even grimmer at a whopping 56% dropoff from last year. 

For context, that means last month founders saw $26.8 billion fewer dollars in venture capital funding than they did this time in 2022. It also begs two important questions: where’s the bottom? And what can fill the massive funding shortfall?

As StartEngine’s Strategic Advisor Kevin O’Leary explained at our latest pitch competition, founders shouldn’t expect institutional dollars to come back anytime soon.⁴ Shocks to the system – like Silicon Valley Bank’s abrupt collapse – have many VCs looking to protect their existing investments (i.e. not adding new companies to their portfolios).

Enter equity crowdfunding (c’mon, you know we’re gonna plug it). Early signs from 2023 suggest crowdfunding could be far more resilient to economic uncertainty than venture capital. On StartEngine alone, 14 funding rounds have surpassed $1 million raised so far this year as we’ve received more than 3,000 applications to raise capital on our platform. In other words, for all of us in the crowd – this could be our moment. Explore investments.

1. Source: https://kingscrowd.com/markets/. Please note a KingsCrowd Edge Subscription is required to access this report.
2. Includes funds raised via Reg. CF and Reg. A+ combined through StartEngine’s funding portal and broker-dealer, as well as StartEngine’s own raise.
3. Why am I seeing these companies? Review how StartEngine promotes offerings here. These Reg CF offerings are made available through StartEngine Capital, LLC. These investments are speculative, illiquid, and involves a high degree of risk, including the possible loss of your entire investment.
4. Kevin O’Leary is a paid spokesperson for StartEngine. View the details here.

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• Should you tell them the story of how you got started in the first place?
• What about a breakdown of your product or service?
• Will they want to know about your competitors? And how in-depth do you go?
• For that matter, is it best to use technical language or keep things to the surface?
• Which of all these factoids do you share first? And what about visuals?

Clearly, there are a lot of directions you can take your offering page…and just as many pitfalls. While much of what winds up on the page will depend on the specifics of your business, we polled investors and these are the key elements you don’t want to miss.

Methodology

The below results come from a survey of 440 users, who made their first investment on StartEngine in the six months prior to said survey. Why focus on first-time investors, you ask? 

Two reasons…

1. It’s in the name: equity CROWD-funding. The idea is to appeal to the broadest swath of potential investors possible, not just power-users who are already familiar with StartEngine’s platform.
2. First-time users are the future. No, that’s not just a cliché. In 2022 alone, we jumped from 700,000 to over 1 million users on our platform. That’s a 42% growth rate. So what those first-time users think – yeah, it matters.

The Findings

1. Explain your product or service

This one almost goes without saying, but investors overwhelmingly care about what it is you actually do. Over 98% of respondents said a company’s product or service is important to their investment decision.

Before you dismiss this advice as obvious, ask yourself: can a layperson easily understand your product or service? If the answer is no, it’s well-worth your time to workshop your product description until it is.

Pro-tip: a tight 30-second pitch equates to roughly three sentences – aka the target length to explain your business.

2. Provide detailed statistics about your market and company growth

Right behind your product/service, 93% of respondents want to know about the competitive landscape, and 85% of respondents care about your growth and revenue.

The secret here: clarity. Though founders generally provide this kind of data on their offer page, when asked many investors felt the information was missing. Basically, if you bury key details in dense paragraphs, the response you get tends to be “too long; didn’t read.”

3. Yes, investors want to know your story

Mr. Wonderful is fond of asking, “what’s so special about you that you can take this idea and execute on it?”* Turns out, so are investors on StartEngine. Over 78% of respondents said the background of the founding team was important to their investment decision.

This is your opportunity to make an emotional appeal to prospective investors – and turn them into champions of your brand. What was the problem you encountered that motivated you to start your business? And how does your relevant experience uniquely qualify you to tackle it? 

You don’t necessarily need your full resume here. But a tight story can go a long way toward demonstrating you have what it takes to go the distance.

4. Where to concentrate your efforts (hint: videos are crucial)

Encapsulating your entire business into an online pitch – that’s a lot of ground to cover. And the truth is, not all investors will read it. In fact, only 36% of respondents said they typically read offering pages in their entirety. So where are they spending their time, and where should you focus your attention?

• Pitch videos: No surprise, in the age of TikTok, 76% of respondents said they watch pitch videos on StartEngine. So it’s worth the investment to produce a quality video. An easy rule of thumb: aim for 2-3 minutes with a mix of b-roll showcasing your product or service, plus interviews with your leadership. Just remember: concision is key.
• The Pitch: These are the 1-2 paragraphs that appear at the top of the page and serve as your first opportunity to pitch investors. 72% of respondents consistently read this section, so take time to make it clear, compelling, and easy to digest.
• Reasons to Invest: These 3-4 bullets occupy prime real-estate on the page. They also offer one of the best changes to present concrete statistics about your business in an easy-to-read format, read by over half of investors.

The Takeaway

There’s a famous saying in sales: don’t make it hard to buy your product. Well, the same goes for equity crowdfunding. Focusing on clarity, concision, and the truly high-impact areas of your offering page makes life easier for prospective investors. While no guarantee, after more than 750 offerings on StartEngine, we’ve found that focus tends to keep said investors on the page longer and – hopefully – nudge them in the right direction.

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

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Equity crowdfunding allows startups to raise capital by selling shares of their company to a large number of investors, typically through an online platform. This approach to fundraising has several key benefits, including the ability to:

Reach a larger pool of potential investors: With traditional fundraising methods, startups are limited to a small group of investors, often friends, family, and wealthy individuals. Equity crowdfunding allows startups to reach a much larger pool of potential investors, including individual investors and institutional investors.

Leverage the power of the crowd: Equity crowdfunding harnesses the power of the crowd to raise capital, allowing startups to receive small investments from a large number of people. This can result in a wider network of supporters and potential customers for the startup.

Democratize the investment process: Equity crowdfunding provides an opportunity for anyone to invest in startups, regardless of their wealth or connections. This can level the playing field for startups and democratize the investment process.

However, traditional fundraising methods have several challenges, including:

• Limited access to capital: Traditional fundraising methods can be limited to a small group of investors, which can make it difficult for startups to raise the capital they need.

• High costs: Traditional fundraising methods can be expensive, with legal and administrative fees adding up quickly.

• Time-consuming: Traditional fundraising methods can be time-consuming, taking valuable time away from the startup’s operations and growth.

Equity crowdfunding addresses these challenges by providing a simpler, more efficient, and cost-effective way to raise capital. It allows startups to reach a wider pool of investors and can provide a faster, more streamlined fundraising process. To succeed in equity crowdfunding, startups should focus on building a strong brand, setting realistic funding goals, and engaging with their investor community.

In conclusion, equity crowdfunding is a game-changer for startup fundraising, providing an opportunity for startups to access a wider pool of investors, democratize the investment process, and raise the capital they need to bring their ideas to life.

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What is Impact Investing?

Impact investing involves investing in companies or projects that seek to make a positive impact on society or the environment. These investments can take many forms, from renewable energy projects to companies that promote social justice. The goal of impact investing is to create positive change while also generating financial returns.

Why Diversify Your Portfolio with Impact Investing?

Diversification is an important strategy for managing investment risk. By spreading your investments across different asset classes, you can reduce the impact of any one investment on your overall portfolio. Impact investing can be a valuable addition to your portfolio because it allows you to align your investments with your values while also diversifying your holdings.

How Equity Crowdfunding Can Help You Invest in Impact Projects

Equity crowdfunding platforms allow you to invest in a variety of impact projects and companies alongside other investors. This can make it easier to access these types of investments, which may be difficult to find through traditional investment channels. Additionally, many equity crowdfunding platforms provide tools and resources to help you evaluate impact investments and understand the potential risks and returns.

Best Practices for Diversifying Your Portfolio with Impact Investing through Equity Crowdfunding

Here are some tips for getting started with impact investing through equity crowdfunding:

• Determine your investment goals and values: Before investing in any impact project or company, it’s important to understand your own investment goals and values. This will help you identify the types of impact investments that align with your priorities.

• Research potential investments: Take the time to research potential impact investments thoroughly. Look for companies or projects with a strong track record of making a positive impact, as well as a solid financial outlook.

• Spread your investments across different projects: As with any investment portfolio, it’s important to diversify your impact investments. Spreading your investments across different projects can help mitigate risk and maximize potential returns.

• Consider the potential risks: Impact investments, like any investment, come with risks. Be sure to evaluate the potential risks associated with any investment before committing your money.

• Seek professional advice: Consider working with a financial advisor or investment professional with experience in impact investing. They can help you evaluate potential investments and make informed decisions about your portfolio.

In conclusion, diversifying your investment portfolio with impact investing through equity crowdfunding is a smart strategy for investors who want to make a positive difference in the world while generating financial returns. By following best practices and doing your due diligence, you can identify impactful investments that align with your values and help you achieve your financial goals.

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Why diversify your startup fundraising?

Relying on a single source of funding can be risky for startups. By diversifying your funding sources, you can reduce the impact of any one investor or funding round on your business. Additionally, equity crowdfunding provides an opportunity for startups to tap into a wider pool of investors who may be passionate about their vision and mission. This not only expands your reach but also helps to build a community of supporters around your startup.

How equity crowdfunding can help you raise funds for your startup

Equity crowdfunding allows startups to raise funds from a large number of individual investors, typically through an online platform. By investing in your startup, these individuals become shareholders and have a vested interest in your success. Equity crowdfunding also provides the opportunity for startups to raise funds without sacrificing control of their company or diluting ownership. This is particularly important for entrepreneurs who want to maintain control over their vision and strategy.

Best practices for diversifying your startup fundraising with equity crowdfunding

To successfully raise funds through equity crowdfunding, it’s important to have a solid plan in place. This includes setting clear fundraising goals, preparing a compelling pitch, and having a strong understanding of your target audience. It’s also important to have a solid business plan and be able to clearly articulate your vision and strategy. Finally, be sure to communicate regularly with your investors and build a community around your startup. This will help to build trust and loyalty among your supporters, which is crucial for long-term success.

In conclusion, equity crowdfunding is a powerful tool for startups looking to diversify their fundraising and tap into a wider pool of investors. By leveraging this tool, entrepreneurs can build a community of supporters around their vision and mission, while maintaining control of their company and strategy. By following best practices and having a solid plan in place, startups can successfully raise funds through equity crowdfunding and achieve their goals.

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