At this point, I’m sure everyone knows a little something about crowdfunding. Its popularity has grown exponentially every year. According to Wikipedia, in 2015, it was estimated that $34 billion dollars was raised this way. With websites like Kickstarter, you can fund all types of projects, from a new piece of technology like a video game to a potato salad recipe (Yes, this actually happened, a man named Zack Brown raised $55,000 on Kickstarter for a new recipe for potato salad).
In 2012, President Obama signed something known as the American JOBS Act into law, and Title IV of the JOBS Act allows companies to now raise between 3 and 50 million dollars from anyone, regardless of income levels. Before this act, investing in startups or other growth stage companies was reserved for only accredited investors (people making $200,000 or more for two most recent years, or with a net worth of $1 million). Title IV, or Regulation A+ as it’s more commonly known, has created a whole new crowdfunding opportunity in the form of investment or equity crowdfunding.
While the JOBS Act was signed into law in 2012, Title IV was just enacted in June of 2015 making Regulation A+ still fairly new. With not a lot of successful campaigns run thus far and not too much data to go off of, the question of “how to run a successful Regulation A+ campaign” is still up for debate.
The fact that people of any income level can invest with Regulation A+, classifies it as “crowdfunding” but that’s basically where the similarities end. Sure, there have been plenty of successful crowdfunding campaigns over the years, some even raising over the $50 million allowed with a Reg A+, but research shows that with most reward-based crowdfunding, friends and family account for a large portion or even a majority of the early raise. You can’t count on that with a Regulation A+.
In addition to friends and family, most successful crowdfunding campaigns lean mostly on social media to push them through the rest of the way. While a good social media push can help a Regulation A+, at the end of the day, Investors are Investors! Most Reg A+ campaigns to this point have been aimed at anyone, and while this is one of the draws of going with Reg A+, getting a bunch of likes on Facebook doesn’t translate to gaining investors.
When it comes down to it, a Regulation A+ is still an investment opportunity, which means it’s still going to take a good investor relations marketing firm to put together a strategy if you really want to be successful in this space.
The Hilton Advisory “Investor conversion optimization” process is not only great for public companies, but its ability to take investors from ones who know nothing about your company or product, to long-term stakeholders who not only invest, but believe in you and will tell others about you, makes it perfect for a successful Regulation A+.
To learn more about how the “ICO” process can work for your capital raising efforts, E-mail me at Colin@hiltonadvisory.com