While equity crowdfunding for unaccredited investors is not yet legal in the U.S.A. until Title III is passed, it is alive and well in other jurisdictions. Capital raising from unaccredited investors takes place every day.
The two most active countries in equity crowdfunding or raising capital with the support of unaccredited investors are Australia (8 years) and the United Kingdom (3 years).
Each operates equity crowdfunding under differing legislation but in reality both have established and operate the largest platforms in each of their countries, ASSOB has facilitated capital raisings of $138 million and Crowdcube $36 million.
One of the best ways to understand the learnings from the platforms is to look at some examples of successful capital raisings.
1. Preshafood (ASSOB) – $3.3 million raised from 29 accredited and unaccredited investors
Preshafood Limited is a food and beverage company using a revolutionary High Pressure Processing (HPP) method to produce fruit juices and food products of an exceptional quality.
The initial capital raising was for $1.5 million to increase production six times. Subsequently further funds were sought to further expand production and distribution.
The initial raise of $1.5 million was oversubscribed by $1 million. Eventually $3.3 million was raised
Preshafood won first prize in both the ‘Best New Juice or Juice Drink’ and the ‘Best New Beverage Concept’ categories, from over 340 entries from 40 countries. The awards served to cement Preshafood’s position as a growing competitor in the quickly developing non-alcoholic beverages industry. The also won Telstra Small Business of the year award and are now profitable, growing and will probably exit to a major drinks industry player
2. E-Car Club (CROWDCUBE) - £100,000 raised from 62 accredited and unaccredited investors
E-Car Club, the UK’s first entirely electric car club, was formed in September 2011 and was funded via the Sustainable Venture Development Partners. The company also had a grant from the Technology Strategy Board (TSB)
Following the successful launch of three Nissan LEAF cars in Wolverton and Milton Keynes, a capital raising of £100,000 was sought to fund operations, including establishment of additional hubs in Southern England and development of strategic partnerships.
Rewards involved free E-Car Club membership, free driving credit, an invitation to join the E-Car Advisory Committee and lifetime community membership (worth £15/month).
E-Car Club successfully raised £100,000 from 62 investors allowing them to continue to develop the business.
In February 2014, E-Car Club secured £500,000 of funding from Ignite Social Enterprise LP, the social impact fund backed by Centrica Plc. The additional funding will allow E-Car Club to pursue its social mission, delivering access to lower cost transport solutions and improving the quality of life for local communities in up to twenty new locations.
3. Opmantek (ASSOB) – $700,000 raised from 28 accredited and unaccredited investors
Opmantek Ltd is an Australian business that develops, markets, packages and distributes software in the network management field.
They were seeking $600,000 in exchange for 25% equity in the company, to launch commercial modules and services to the existing customer base.
The funds raised through this offer were predominantly to:
- Hire a Chief Technology Offices and two Developers to support and develop parallel innovations;
- Fund the commercialisation and marketing of NMIS v8;
- Apply for patent protection of intellectual property.
$700,000 was raised and due to continued demand in the shares secondary sales eventuated
Opmantek Ltd has confirmed that another major Latin American telecommunications provider has licensed its award winning Network Management Software – NMIS .he company continues to grow and will probably exit to a major telecommunications player
4. Righteous (CROWDCUBE) – £225,000 raised from accredited and unaccredited investors
Righteous, the ‘all natural’ salad dressing brand was set up by ex-Unilever marketer Gem Misa in 2011.
In 2012 Gem raised £75,000 to create a marketing campaign and nurture growth. At the end of 2013 Misa a capital raising for further £150,000 to expand into overseas markets, including Canada via Costco and the USA via Whole Foods distributor KEHE.
The potential for this London-based business is huge, with the USA condiments market worth ten times that of the UK (£11 billion).
Righteous products are now sold in over 600 supermarkets in the UK (Tesco, Waitrose, Ocado, Boots, Sainsburys) and more than 500 in North America. Business turnover has grown by 1,260% in three years (from £122,500 in 2012).
5. SelfWealth (ASSOB) – $1.65 million raised from 32 accredited and unaccredited investors
- The new paradigm in investing;
- A community of self investors; and
- “Self Investment Made Simple”.
SelfWealth offers a low-cost, holistic solution to self-directed investors delivered seamlessly on-line, enabling investors to take greater control of their own wealth creation for an annual subscription fee without commissions.
SelfWealth sought $1,492,551 to build their on-line offering to self-directed investors.
$1.65 million was raised with two angel investors starting the raise off with $200,000 each.
The Company has developed a social network for investors. Instead of paying fees and commissions to professionals, SelfWealth enables pension fund owners to collaborate with the community and construct their own portfolio. SelfWealth is providing portfolios, performance, reporting and great research tools – all in one place.
Each of the above equity crowdfunding raises needed a compliant professional equity funding platform but more importantly each needed a story, team and followers.
For companies considering raising funds they should self-assess to check they have:
- A Convincing, Compelling, Credible Story coupled with a perceived viable business model
- A Balanced, Passionate, Capable and Likeable Team
- Lots of Suitable People to share the story with and engage
Each of the examples above had a great story, good business and capital raising teams and lots of followers.
In regard to followers, ASSOB’s experience is that the campaign manager and the capital raising team must motivate their own networks and drive support and investments from friends, family, fans and followers.
The capital raising teams (including intermediaries) for each of the above raises will have personally engaged with 80% of the eventual investors. Experience shows that around 50 to 60 percent of the investors usually come from people 1 to 2 levels out from the entity raising capital. That is friends, family, fans and followers. A further 20 to 30 percent come from the second level contacts. Friends of 1st level contacts. Finally the rest, and usually later in the raise and often by far the most money comes from so called “smart money”. People the raisers initially have no contact with but these people wait to see that people are supporting the offering which give it legitimacy.
To successfully raise the capital, capital raising teams need to roll up their sleeves. The need to point their 1st and 2nd level contacts towards the profile page on the capital raising platform and once they are there they need to reach out, nurture and convert investors at each level of contact. Online marketing isnt enough. Frequent updates and personal interactions are essential.
Once Title III is enacted these examples will be multiplied many fold.