New regulations signed into law as part of the JOBS Act earlier this year will make it possible for small business owners interested in crowdfunding equity-based capital. In today’s guest post, Jason Best and Sherwood Neiss share their 10 tips for successfully crowdfunding.
1. Startups and small business need to know that using equity-based or debt-based funding may NOT be done until the SEC issues its final rules regarding equity and debt-based crowdfunding. This is scheduled to occur in the first quarter of 2013, but the exact date will be determined by the SEC.
2. Businesses that want to be successful with crowdfunding will still need to complete all the steps that are normally required to raise money in the traditional manner: Create a business plan, complete a budget, determine exactly how much money will be needed, how much of your company will you sell (if you are doing equity-based crowdfunding), etc.
3. Choose the crowdfunding platform that best meets your needs. There will be a number of excellent, SEC-approved crowdfunding websites available to select from. Do your due diligence on which one best suites your market, needs and process.
4. Check your credit so if there are mistakes, they can be fixed prior to seeking crowdfunding investment.
5. Build your social network. Most (if not all) of your funds will be from people within your social network (first, second or third degree connections). Make sure you have completed and updated your LinkedIn, Facebook and Twitter profiles and connect with all the people who are in your personal and professional network. However, do not overconnect — you do not want to create an artificially large network that will backfire on your fundraising efforts.
6. Build your physical network. Are you a member of your chamber of commerce or other active organizations in your industry, city, and interest groups? Find groups that you truly care about and want to engage with and take an active role. This will position you as a leader in your city or industry and will help raise your profile when you go back out to raise funding.
Jason Best and Sherwood Neiss are the co-founders of Crowdfund Capital Advisors and co-authored the Crowdfunding Framework used in the JOBS Act that was signed into law by President Obama on April 5, 2012. They co-founded the Crowdfund Intermediary Regulatory Advocates (CfIRA) and the Crowdfunding Professional Association (CfPA), the two leading crowdfunding associations in the industry.