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.

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.

The post Interview with Harrison Gross, CEO & Co-Founder Innovative Eyewear appeared first on StartEngine.

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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.

The post 4 Can’t Miss Elements for Your Campaign Page When Raising Capital appeared first on StartEngine.

StartEngine began raising funds directly from the crowd to showcase the possibilities of crowdfunding – and we’ve learned a lot over the years. This guide contains learnings from over 750 campaigns on the platform, including our own!

By following the marketing strategies and utilizing the resources found within this material, you can make a big impact on your campaign. Refer to this guide frequently throughout the course of your offering and follow as many recommendations as you can.

“It’s a mutually beneficial relationship where you can engage with people who like your product, get your product, and want to see you go to the next level, and they also get to benefit from that ride.”

StartEngine alum, Ray Phillips (SoapSox CEO) on his experience crowdfunding.

Table of Contents

This guide was specifically created with Regulation Crowdfunding in mind. For more specific help items, please refer to the help center here.

Pre-Launch Marketing Resources:

• Should I offer perks?
• Getting Started on Your Campaign Page Video
• Compliance 101 – Guidelines for Regulation Crowdfunding
• What Can I Do to Have a Strong Launch On StartEngine?
• Launch Week Best Practices

Post-Launch Marketing Resources:

• Live on StartEngine! Now What?
• Your Post-Launch Resources
• Founder Outreach & Community Marketing
• Campaign Page Updates
• How Should I Approach My Campaign’s Paid Media?
• Tracking Your Marketing Efforts
• What Does StartEngine Do To Market My Raise?
• Closing Strategy: Leveraging Urgency Messaging

The post Founder’s Field Guide: The Play-by-Play for How to Market Your Capital Raise appeared first on StartEngine.

Unlike private capital raises that require very few investors to drive success; equity crowdfunding raises are unique in that they require leverage from “the crowd.” Regulation CF and Regulation A+ raises will especially thrive the most when looking for investments from three key communities: 1) your community, 2) the platform’s community, 3) and those who are unfamiliar with both yourselves and the platform. Because companies within equity crowdfunding tend to be at earlier stages of growth, many of these investors often become future customers, or even loyal brand ambassadors – cheering companies on from the sidelines, hoping that they become future success stories.

As a registered funding portal, StartEngine is required to treat every Reg CF raise on our platform equally – we cannot highlight any raise over another. However, due to Rule 402 of Regulation Crowdfunding (the Conditional Safe Harbor Rule) – StartEngine is permitted to identify particular issuers or offerings based on objective criteria where the criteria are reasonably designed to highlight a “broad selection” of issuers offering securities. 

As StartEngine seeks to expose our community to relevant offerings that each investor is likely to be interested in, we grant additional features to companies who have demonstrated their offerings are backed by a certain level of social validation. We’ve found that obtaining 100 new investors is a good metric to validate offerings, and consequently, have designed a standalone email feature to showcase campaigns who meet this objective criteria.

Being able to bring 100 Net-New Investors within the first 30 days of a campaign will grant issuers a standalone email to our wider community (versus other emails that might go out to a subset) – and is one of the earliest most impactful touchpoints that issuers can take advantage of on StartEngine. 

Who Counts As a New Investor?

A Net-New Investor is defined as someone who has never made an investment on StartEngine’s platform. In order to qualify for the 100 new investor email, you need to receive 100 first time investments within the first 30 days of your launch.

For example, if Person A has invested in another offering on StartEngine prior to investing in your raise, they will not count towards your goal of 100 new investors; however, if Person B creates a brand new account and then invests in your offering as their very first investment – then you can expect to see Person B included in your Net-New Investor count once their investment clears.

How Can My Company Achieve 100 New Investors?

While we wish there was some sort of cut-and-dry cookie-cutter approach to this, there simply isn’t. It won’t be easy, and will almost certainly require time and effort; but there are, in general, best-practices that can be followed in order for your company to bring in 100 net-new investors from your community. The strategy can start even before the campaign launches, by way of Test The Waters (TTW) Messaging; with outreach going into high-gear once your raise is live.

Best Practices

1. Phone Calls

Talk to the people in your network who know you best, and have members of your executive team do the same. We often find a team of five people can reach 100 new investors in as little as 80 calls each. Personal outreach can be powerful.

The people who are in your rolodex and are closest to you might just be your biggest supporters. Those people might also know people – and when you get to talking over the phone rather than over an email – they might just say “Well hey, this is really interesting – I know someone who also might be interested.”

2. Emails Lists and Email Captures

Before you even launch, you can start garnering interest from prospective investors by implementing an email capture field on your website.* Email lists and leads and captures are beneficial because they will help you have an audience to go out to directly when you launch. You can also leverage these audiences with perks like loyalty bonuses – to further encourage them to invest earlier on. In addition, you can segment out emails between potential investors, friends and family, and more generalized interest parties (i.e. customers and other groups).

The more emails you can secure, the greater the opportunity for you to be bringing actual net-new individuals; which is the only way to count towards the 100 net-new investor standalone emails (past StartEngine investors do not count). If you are coming from another equity crowdfunding platform then you should definitely make use of any email lists that you have on hand since there will likely be a low amount of overlap in users.

3. Conferences and Networking Events

Networking Events and conferences are one of your biggest allies. Not only does it allow you to gather that list of contacts to call – it gets you face to face with prospective investors who can ask questions and get a better understanding of who your business is and why they should invest in you.

If you live in a major metropolitan area (think LA, Miami, Dallas, New York, Detroit, Atlanta, etc.) chances are you have a thriving set of opportunities to attend networking events. Even if they aren’t necessarily in your industry – you might meet someone there who finds your business interesting enough to invest. You can even attempt to host your own event and invite people in your network, asking them to invite people that they know. Think of it as a more personal webinar.

4. Content, Content, Content (i.e. TikTok, Instagram Reels, YouTube Shorts, and more)

Content is king – and according to Ad Age, the average attention span for consumers is roughly 8 seconds. It’s important to be able to reach people while they are scrolling, and capture their attention enough to make them stop and watch.

Graphics are key – especially if you want to stand out from the rest of the noise. Try and pay attention to digital trends as well – using the latest “audio clips” or trending/relevant hashtags Post regularly – even if it’s just you talking to the camera talking about what your company has been doing as of lately. If  you have any products, use this as an avenue to show those products off.

You may recall a  a YouTube channel from the early aughts, called “Will It Blend.” Here Blendtec would post videos of their pilot blender – actually blending regular household products like Iphones and Rake Handles.  Similarly, Gary Vaynerchuck made his fortune in part from selling wine via daily vlogs on a channel called “Wine Library”

It’s all about eyeballs. And the more opportunities for people to see who you are and what you do, allows for more ways for people to say “I want in.”

5. Podcasts, YouTube Interviews, and More

There are 383.7 million podcast listeners globally as of November 2022. People turn to podcasts and YouTube for education, entertainment, and more.

Podcast and YouTube interviews are great ways to gain the ears of longtime listeners (potentially first time investors). While your raise pitch may not be the first thing that a user hears when they listen to the podcast, the individuals who stick around until the end of the show are much more likely to be the ones to invest.

Look for podcasts that are done local to where your business is headquartered. Cold emailing or Direct Messaging people on social media are easy ways to get in touch with hosts. They may not immediately answer, but if your message is appealing or interesting enough, they might just have you onboard. Try to keep things segmented based on your industry for a more hyper-focused approach since those listeners are more likely to be interested in your investment opportunity.

At the end of the day, this is exposure for your business, content for the host, and a win-win situation for everyone involved.

6. Leveraging Your Connections and Board Members

The people closest to you – your friends, family, and board members – all want to see your raise succeed; and asking them for help in spreading the word about your raise is all a part of leveraging the crowd.

This is the easiest form of networking, and these are the people who believe in your business the most. These individuals can invest, tell their friends and contacts to invest, and perhaps even get friends of friends to invest. This is also how larger investments can be secured – through people who believe in your business talking about it to others who believe in your mission. If any of these people happen to attend networking events or seminars and strike up a conversation about your raise, this also extends your reach to a larger group of people with ease.

For all you know, that extra word of mouth opportunity might get the attention of a large celebrity who decides to tell the whole world about your business!

7. Brick and Mortar Outreach

If you have a physical location, leverage that to your advantage!  If it’s a tap-room or bar, try giving out coasters with scannable QR codes. If it’s a restaurant – hand out flyers to people or put a banner in front of your location (one past issuer Honey Bee Burger actually added a billboard in front of their location which helped their raise tremendously). If it’s a store (or if you sell consumer goods online) include items with your packaging that people can scan to learn more about the investment opportunity.

This should be low hanging fruit because it’s people who are already aware of your brand or business! If you have repeat purchasers or loyalists this is especially important!

Don’t think it can be done? Here are five fellow founders who reached 100 new investors:

1. Pencilish

This issuer leveraged their prior WeFunder investor list to the best of their abilities and managed to bring in 100 Net-New Investors in just two weeks. This issuer also hosts a podcast and sends out  newsletters about their business, using those avenues as ways to promote the raise as well.

2. Popcom

This was not PopCom’s first raise on StartEngine – in fact they have had several raises on StartEngine – so securing Net-New Investors was no easy feat for them. Despite the odds, they were able to do it. They hustled and helped put on large scale events (including one attended by P-Diddy), as well as managed to get themselves onto a SiriusXM radio show, where they discussed the opportunity to invest on national airwaves. This is a great example of how repeat raisers on StartEngine can still find unique and creative ways to reach new people and still qualify for the standalone email.

3. DroneDek

This issuer leveraged a Test The Waters list of 500+ people – allowing them to secure a large list of individuals interested in investing before the raise went live. They also sent emails to past investors from their WeFunder raise.

4. The Coffee Class

This issuer leveraged their brick and mortar locations to help spread the word about their raise. They also used their list of contacts at their disposal to call and email people closest to them and allow those investors to learn about the investment opportunity.

5. Phizzle

Prior to launching, this issuer put together a list of loyalty bonus eligible investors and sent them consistent emails and phone calls. The loyalty bonus added an extra incentive for these people to invest. Their board was also very involved in terms of making sure that they saw the success of reaching the 100 new inventors goal.

It’s Going To Be Difficult, But Don’t Give Up!

Bringing in 100 Net-New Investors is a reach-goal for a reason – and unfortunately not everyone is going to achieve it. Setting yourself up for success in advance is key; and being confident that you’re up for the challenge is important.

Oftentimes issuers who do not meet the 100 new investor criteria waited too long to start securing investors, or gave up on the outreach, losing hope that they would receive the email feature. Other issuers may have tried to run paid ads to secure 100 Net-New people rather than doing the hard work by reaching out to those close to the company or executive team on a more personal scale, but the difficulty there comes with validating your business to people who oftentimes don’t know who you are or what your business is. Remember: an advertisement is much less effective than an IRL (In Real Life) interaction.

Most importantly, even if you don’t meet the criteria for the 100 Net-New Investor email – it’s not time to throw in the towel. As long as you follow the best practices outlined above, you still have a real opportunity to hit your raise goals. Whether or not the email goes out, doesn’t change the fact that you will have laid the groundwork for a successful raise. Remember: stay positive, and good luck with all of your outreach!

*Please note, that the TTW Money Legend is required on the page – indicating that this is not a solicitation but an indication of interest (see below). A screenshot of the form on your website will also then need to be included in your Form-C when you launch – something your Onboarding Manager can assist you with.

TTW Money Legend:
NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED, AND IF SENT IN RESPONSE, WILL NOT BE ACCEPTED. NO OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE CAN BE RECEIVED UNTIL THE OFFERING STATEMENT IS FILED AND ONLY THROUGH AN INTERMEDIARY’S PLATFORM. AN INDICATION OF INTEREST INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND. “RESERVING” SECURITIES IS SIMPLY AN INDICATION OF INTEREST.

The post The First 100 New Investors in Your Capital Raise appeared first on StartEngine.

What is Equity Crowdfunding?

Equity crowdfunding is a way for startups to raise capital from a large number of investors. It allows companies to sell securities, such as equity or debt, to a wide pool of investors, including both accredited and non-accredited investors. Equity crowdfunding is typically conducted through online platforms like StartEngine, which provide a centralized platform for companies to market their securities and for investors to invest in those securities.

Benefits of Equity Crowdfunding

Equity crowdfunding has several benefits for startups. First, it provides access to a larger pool of investors, which can help you raise more capital and build a broader investor base. Second, it allows startups to maintain control over their business and avoid giving up equity to traditional funding sources. Third, it provides more flexibility in terms of funding amounts and terms, allowing startups to tailor their fundraising to their specific needs.

Alternative to Traditional Funding Sources

Equity crowdfunding is a great alternative to traditional funding sources like angel investors and venture capitalists. Unlike these sources, equity crowdfunding allows startups to raise capital from a larger pool of investors and provides more flexibility in terms of funding amounts and terms. Equity crowdfunding also allows startups to maintain control over their business and avoid giving up equity to traditional funding sources.

Conclusion

Equity crowdfunding is a great alternative to traditional funding sources for startups. It provides access to a larger pool of investors, allows startups to maintain control over their business, and provides more flexibility in terms of funding amounts and terms. It’s also a great way for startups to build a broader investor base and to test the market for their products or services. Equity crowdfunding platforms like StartEngine provide an easy and accessible way for startups to raise capital and connect with potential investors.

Overall, equity crowdfunding is a great way for startups to raise capital and access a wider pool of investors. With more flexibility and control, equity crowdfunding provides a great alternative to traditional funding sources. Startups should consider equity crowdfunding as a viable option when looking to raise capital and get their business off the ground.

The post Why Equity Crowdfunding Is a Great Alternative to Traditional Seed Funding Sources for Startups appeared first on StartEngine.

What is Seed Funding?

Seed funding is an early-stage investment that typically comes from angel investors, venture capitalists, or other early-stage investors. The funding is used to help startups get off the ground and often goes towards product development, market research, and other early-stage activities.

Benefits of Seed Funding

Seed funding has several benefits for startups. First, it provides the capital necessary to get your business off the ground. Second, it can help attract additional investors and partners. Third, it provides validation for your business idea and can help you refine your business strategy. Finally, seed funding can help you build a network of advisors and mentors who can provide guidance and support as you grow your business.

Alternative Funding Sources

While traditional funding sources like angel investors and venture capitalists have been the go-to for many startups, equity crowdfunding has emerged as a popular alternative. Equity crowdfunding platforms like StartEngine allow startups to raise capital from a larger pool of investors and provide more flexibility in terms of funding amounts and terms.

Conclusion

Seed funding is a crucial part of getting your startup off the ground. It provides the capital necessary to develop your product and refine your business strategy, and can help you attract additional investors and partners. Equity crowdfunding platforms like StartEngine offer a great alternative to traditional funding sources, allowing startups to raise capital from a larger pool of investors and providing more flexibility in terms of funding amounts and terms.

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Disclosure Requirements

One of the key differences between Tier 1 and Tier 2 offerings is the level of disclosure required. Tier 1 offerings require less disclosure than Tier 2 offerings. For example, Tier 1 offerings only require two years of audited financial statements, while Tier 2 offerings require three years of audited financial statements. Tier 2 offerings also require ongoing reporting requirements, including annual and semi-annual reports.

Investment Limits

Another difference between Tier 1 and Tier 2 offerings is the investment limits. In a Tier 1 offering, non-accredited investors are limited to investing no more than 10% of their net worth or annual income, whichever is greater. In a Tier 2 offering, non-accredited investors are limited to investing no more than 10% of their net worth or annual income, whichever is less.

State Blue Sky Laws

Reg A offerings are subject to state “Blue Sky” laws, which are state-level securities laws designed to protect investors from fraudulent activities. Tier 1 offerings are subject to Blue Sky laws in the states where the securities are sold, while Tier 2 offerings are subject to Blue Sky laws in all 50 states and the District of Columbia.

Marketing and Advertising

Another difference between Tier 1 and Tier 2 offerings is the level of marketing and advertising allowed. Tier 1 offerings are subject to limitations on the type and amount of advertising that can be used to promote the offering. Tier 2 offerings, on the other hand, allow for more liberal advertising and marketing activities.

Costs and Fees

The costs and fees associated with Tier 1 and Tier 2 offerings also differ. Tier 2 offerings are generally more expensive than Tier 1 offerings, due to the additional disclosure and reporting requirements. Companies raising capital through a Tier 2 offering may also be required to pay ongoing fees to maintain their registration with the SEC.

Conclusion

In summary, there are several key differences between Reg A Tier 1 and Tier 2 offerings, including disclosure requirements, investment limits, state Blue Sky laws, marketing and advertising restrictions, and costs and fees. Companies and investors should carefully consider these differences when deciding which type of offering to pursue or invest in. While Tier 2 offerings offer more flexibility and a higher fundraising limit, they also come with additional costs and requirements. Tier 1 offerings may be a better fit for companies with lower capital needs and simpler reporting requirements.

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What is a Reg A Offering?

A Reg A offering is a type of offering that allows private companies to raise up to $75 million from both accredited and non-accredited investors. The offering is regulated by the SEC under Title IV of the JOBS Act and is often referred to as a mini-IPO.

How Does a Reg A Offering Work?

A company looking to raise capital through a Reg A offering must first file an offering statement with the SEC. The offering statement includes information about the company, its management team, and its financials. Once the offering statement is qualified by the SEC, the company can begin to market and sell its securities to the public.

There are two tiers of Reg A offerings: Tier 1 and Tier 2. Tier 1 allows companies to raise up to $20 million in a 12-month period, while Tier 2 allows companies to raise up to $75 million in a 12-month period. Tier 2 offerings are subject to additional disclosure and ongoing reporting requirements.

Benefits of Reg A Offerings

Reg A offerings have several benefits for both companies and investors. For companies, Reg A offerings provide a way to raise capital without having to go through the traditional IPO process. They also allow companies to market and sell their securities to a wider audience, including both accredited and non-accredited investors.

For investors, Reg A offerings provide an opportunity to invest in private companies that may not have been available to them otherwise. They also provide greater liquidity than traditional private placements, as securities purchased in a Reg A offering can be freely traded on the secondary market.

Conclusion

Reg A offerings are an attractive option for small and medium-sized businesses looking to raise capital. They provide a way to access capital markets without going through the traditional IPO process, and they allow companies to market and sell their securities to a wider audience. Investors also benefit from Reg A offerings, as they provide an opportunity to invest in private companies and provide greater liquidity than traditional private placements.

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