Crowdfunding allows the average consumer to invest in the average [new] company, while before the JOBS Act of 2012 that early participation was open to accredited investors only.
Things for anyone considering investing under Regulation A+ or Regulation CF that came out of CrowdInvest Summit 2016:
- Businesses need people who care about what they are selling. Crowdfunding is the ultimate validation of product value to their best customers.
- Crowdfunding seeks out the “investomers” and democratizes the investment process.
- What is the Pre-Money Valuation ? Where is the business heading ? Where will the funds be spent and why? Marketing budgets can be around 5% of a crowdfunding campaign.
- People invest in what they love, and in what they understand.
- What’s the exit strategy ?
- Regulation A+ requires an independent GAAP audit, while Regulation CF an independent review of two years of financial statements.
Key takeaways For Entrepreneurs
- Can you be the best evangelist for your product ?
- Do you have a proven ability to execute ?
- Can you balance teams in a start up ? (for example don’t have three engineers and zero marketing people, but have engineers, marketers, as well as salesmen on your team)
- What does your business need ? That’s where you want your focus.
Real Estate Crowdfunding Considerations
- There is some idiosyncratic risk at the asset level
- Lots of opportunities with an asymmetric risk profile
- What CR funds look for are great assets, but mismanaged
Mistakes [some] entrepreneurs do
- When they pitch they don’t tell a story
- If they have patents, don’t realize patents can be difficult to protect.
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