This AI generated image that is supposed to illustrate the title of this article is really creepy. These two bizarre, plastic-skinned, dead-eyed Tom Cruises with a Flock of Seagulls wigs are going to haunt me in my dreams forever.
Part Six of a Six Part Series Comparing Regulation A and Regulation Crowdfunding
So you’ve decided to use equity crowdfunding to raise capital for your company. You’ve made the decision to use either Regulation A (a/k/a Reg A or Reg A+) or Regulation Crowdfunding (a/k/a Reg CF). Now comes the fun part... what do you have to do to actually raise capital?
If it’s not clear already, equity crowdfunding is not like the movie Field of Dreams. Just because you build an offering page online, does not mean that investors will come. Reg A and Reg CF are all about your company driving potential investors to your online offering page. The key to every successful equity crowdfunding offering is marketing to drive investors.
This article is all about marketing.
By marketing, I mean doing all of the things to drive traffic to your equity crowdfunding offering page, then to convert that traffic into investors. Suffice to say, there are a lot of moving parts to make this work. This article will explore the Top Ten things you must do, in my opinion, to have a successful offering and raise millions of dollars online selling securities in your company through either Reg A or Reg CF.
1. Plan your marketing well before you launch
Depending on how much you are trying to raise and how large your “low hanging fruit” group of potential investors may be, you may have a fairly simple and inexpensive marketing plan, or you may need a very complex and costly one.
By “low hanging fruit” I mean people who already love your company, your fans and customers, your email or newsletter lists and your social media followers. If this group numbers in the hundreds of thousands, and you are only trying to raise $1M, your entire marketing plan might be a series of emails and social media posts to that crowd.
But if you don’t have a huge group of built in potential investors, then you need to be ready to market to find investors because, believe me, they are not going to find your offering otherwise. At the very minimum, you will need email and social media marketing assets ready to go at launch and people in place to respond to online comments and responses to your emails. You may need to contact a PR firm. You may need to engage influencers to help spread the word. You will likely need to run digital ads, and if so, will need someone who understands that world to help you do it effectively.
At a bare minimum, you should set up a social media calendar, prepare emails in advance, and get your ducks in a row with every marketing asset you plan to use well before you go live and start accepting investments. Once the offering hits the internet, you should already have everything ready to go and have your marketing machine cranking. If you wait to do any of this until you have launched, you are way behind the eight ball and will be playing catch up.
Create a plan. Write it out and disseminate it. Make sure everyone knows their role and the expectations you have of them. Have them ready to rock and roll the day you launch. Then stay on your team and be sure they do what they are supposed to do.
And remember, if you do any marketing prior to the formal launch of your Reg A or Reg CF offering, you must follow “Testing The Waters” rules including having the testing the waters disclaimer on all marketing you do prior to your official launch. Failing to do so will get your company into regulatory trouble.
2. Have a great video
I cannot emphasize strongly enough how important a crowdfunding video is to the success of most equity crowdfunding offerings. Many people who are driven to your offering page online will watch your video first. If they are impressed, some will invest right then without even reading much more on the page. I have seen this happen over and over again. Others will be intrigued enough to learn more on your page and read further. But if your video is bad, unprofessional, has poor audio or video quality, or otherwise doesn’t get people excited about your company, you have lost that potential investor forever.
Your chances of success are greatly enhanced by the video you use. I could, and will one day soon, write an article on crowdfunding videos alone, but for now let’s leave it at the video needs to tell your company’s story and get people excited about investing.
3. Build a compelling offering page
On most equity crowdfunding sites, investors see the video and some basic information about the offering and your company first. This area one sees when they first visit your offering page is called “above the fold” – a reference to the old newspaper saying about the news that was on the paper’s front page at the top – or above where the paper was folded. This part of the offering page is by far the most important, for the same reasons the video is important. There is a strong chance that the section “above the fold” containing your video is going to be the determining factor as to whether you get someone excited to be an investor, or lose them before they ever scroll down and see everything else you have to offer.
I always say to my clients “If you want to become a billion dollar company, start acting like one now whenever you can.” The above-the-fold top of your offering page needs to make your company look like you are, or someday will become, a billion dollar company. Show off your logo. Include something visual about your company to grab attention. Write a killer headline and if there is any text above the fold, use it to your advantage. Don’t make people scroll down the page to learn what your company is all about, or to highlight the one or two biggest selling points of your offering.
Below the fold, be sure to use a good mix of short paragraphs and photos or graphics. Highlight the things every investor wants to know: What am I investing in? Who are the people running the company I’m investing in? How will your company take on the competition in your industry? What are you using my money for? How will I get a potential return on my investment?
Don’t overdo it. I’ve seen companies spend inordinate amounts of time designing offering pages that go on and on into a seemingly bottomless pit of unimportant minutiae that a huge percentage of site visitors are never going to read. Remember, the tedious disclosures, financials and legalities are in your SEC filing and anyone can read that document on the offering page if they want to get all the details. The offering page is, bringing it down to basics, just a big ad for your securities offering. Treat it like the ad that it is. Don’t turn it into War and Peace because very few people will ever scroll down to read the entire thing. Keep paragraphs short, use interesting and eye grabbing photos and graphics, and use highlights – not details – to convey the opportunity.
4. Kickstart your offering with friends and family
On your equity crowdfunding offering, the very top of your offering page will display an important number – the total amount of money you have raised to date. The day you launch, this number is going to read $0.00. That’s not a good thing for people to see.
When people from the general public start to see your offering page, you need to have already raised money, so that big fat zero doesn’t chase them away. Remember, nobody likes to be the first one on the dance floor.
The solution to this - and by far one of the most important but also most ignored rules to a successful crowdfunding offering – is to go to friends and family to invest in your offering before you show it to anyone else.
If your friends and family are not interested in investing in your company, why would you think anyone in the general public would be interested?
Here is another important tip: when you reach out to friends and family, this means the friends and family of everyone on your management team, your board, your advisory board, and any employees willing to help. The more people involved, the more friends and family you will reach and the more capital you will raise.
Also, if you’re not the kind of person who likes to ask people for money, you should not be using equity crowdfunding. If you’re a not big enough believer in your company to want to ask your friends and family to be a part of its growth, then you should not be using equity crowdfunding.
I had one client raise more than $350,000 from his friends and family on the first day of his offering. He had reached out a few days before to give them all a heads-up, and on launch day all he had to do was give them the URL and remind them how important it was to get the investment done that day. It was like a well-oiled machine. When he then started driving investor traffic to the page, people saw that in one day he had raised 1/3 of his goal already. That created a sense of urgency and FOMO. The rest of the offering went very well, needless to say.
5. Go after low hanging fruit first
So you brought in your friends and family first and your offering page shows you already have investors and have raised capital. What’s next? Time to go to the next group of “low hanging fruit” and invite your customers, clients, and social media followers to invest.
This group already knows your company. They are likely fans of your company. You do not have to pay anything to get to them. So take advantage of this opportunity and email them for a few days. Invite them to invest before the general public. Generally, I recommend giving your customers and your email list a chance to invest before your social media followers, because they will convert better in most cases. That increases the numbers on your offering page before people from the general public, who might come across your social media posts but really don’t know you, see the offering and how much has been raised. People like to follow a crowd. So use your crowd to pump up the numbers first before trying to get strangers to invest.
Also note, these emails and social media posts are not a one off. Follow best practices on email solicitations and social posts, but you have to do far more than one email and one social post for this to work. Remember, not everyone opens every email. And more importantly, only a small percentage of your social media audience sees every post.
6. Digital Ads
You’ve hit up your friends and family, you’ve reached out to your social media audience and you have emailed your customer list. You now have some money in the war chest. The next three tips and tricks talk about bringing in people from the general public who may or may not know your company or brand.
The most common way is through digital ads.
Remember, you are also marketing your company when you run these ads. If done effectively, you could increase sales and revenues also from these ads. You may get new business opportunities from these ads, even from people who do not invest. Some people may not invest, but they may try your company or buy your products. You will have used cookies and pixels to track those who visited your offering page and didn’t invest, so you can remarket to them for sales and investments. Many of those who did not invest will come back in and invest when you get to the end of the offering where you let them know time is running out.
Effective digital ads for equity crowdfunding are an art, and a science. Unless you have a lot of expertise in house, you should consider hiring an outside agency to do this for you. Running ads is an expensive way to drive traffic and convert it into investors, so spend the money wisely. Look for an agency with success in Reg A and Reg CF in offerings similar to yours, and they can help define the audience, create lookalike audiences, use the right platforms for ads and advise where to spend the money – new leads, retargeting, etc. Google and Meta are the key, but others can also work. How you use Google and Meta ads are important to leave to people with experience using ads to raise investment capital.
Remember, running digital ads is a process. Do not expect the same results in week one of running ads as you will get when the audience is refined, the ad creative is tweaked, the timing of ads is established and you have figured out what works, where it works and when it works. To really be effective, my experience has been that it usually takes 60-90 days of running ads to get it to a point where you can rely on ads to produce a consistent return. You have to be patient before scaling up your ad spend, but once you do, you should be able to determine with a decent about of certainty how much each dollar of ad spend will return for you in investment commitment dollars.
7. PR
Raising capital online is a numbers game. Driving eyeballs to your offering page is what the marketing is all about. There are very few things that drive as many eyeballs in a short period of time than a great PR placement that gets your offering in front of a huge crowd of people.
Do not confuse public relations with putting out an online or on the wire press release. A press release has some benefit, but will not be likely on its own produce a lot of investment dollars. A good PR firm will get you media interviews and stories in media that reach a lot of people. Don’t expect to end up on the Today Show or in the Wall Street Journal. If you do – Bonanza! Remember, a well-placed local media interview or two can produce great results from potential investors who may already know your company and may be more likely to invest in something local to them than something 3000 miles away.
The key is getting the interviews or placements, and making sure to pitch the investment opportunity when you do. If you just talk about your company, but never mention the investment or the URL where people can invest, you wasted a golden opportunity.
8. Influencers
People get very excited about bringing on influencers and reaching a large number of people through them. I’ll be the first to tell you from experience that influencers can work – after all, Reg A and Reg CF are a numbers game and if you drive enough eyeballs to your offering page, you will produce investors. But you need to have the right influencers and the right messaging, and be ready to engage with the influencers’ audiences who ask questions or make comments. Having a social media influencer who gives cooking tips to millions of followers talk about investing in your new game-changing flying car is probably not going to produce the results you are looking for.
One important thing to look for in addition to aligning with the influencers’ crowd – look for engagement in addition to the size of their reach. A person who posts to 1,000,000 followers and gets 15 likes and no comments is far less valuable to you than an influencer with 50,000 followers who repeatedly get 5,000 likes and 1,000 comments every time they post.
You also have to be very careful with influencers when it comes to securities laws. Just like you must not make false or misleading statements if your company posts on social media, when you pay influencers to post for your company, they have to be truthful and not mislead. They have to disclose if they were compensated. Leaving the content totally up to an influencer can lead to disaster. An unchecked influencer may post that an investment in your company will make people rich overnight, or create other unrealistic expectations that will draw the attention of securities regulators. Keep a tight rein on what influencers post or say, and you will keep yourself out of trouble.
9. Investor Relations
This is, by far, the one extremely important area that I see companies fall short on. You absolutely need someone, or more than one person, to (a) communicate with investors, applicants and leads (b) to answer their questions and help them out when help is needed (c) to follow up on social media comments and posts – including comments under your digital ads and (d) to manage your ongoing emails and marketing to your investor base.
Let me talk from experience here. No matter how much someone invests in your company – be it $100 or $1,000,000, they want to be kept informed about what is going on. The easiest way to avoid having a lot of questions and messages and phone calls from a large investor base is to communicate with them regularly, and effectively. They own part of your company – so let them know what is going on with the company they own. I strongly suggest weekly e-mail and/or video updates to help keep investors informed and engaged. These can be 5 minute videos or 3-4 paragraph emails. Remember, you want them to be brand ambassadors and company evangelists, but they will not do that unless they know what is going on and you make it easy for them to help by keeping them engaged.
If you take care of your investors, keep them informed, and treat them like the owners of the company that they are, you will find a healthy percentage of those investors will help you promote your online offering and otherwise. If people who paid you money to invest become an army of marketers for you, your marketing budget will decrease while you continue to raise capital from the additional crowd your investors bring to the table.
10. Perks
What, if anything, do you give to your investors in addition to the stock the pay for? You do not need to give away perks, but if you do, you need to do it right. Perks are things as simple as a branded hat or T-shirt that every investor gets, or as elaborate as a once-in-a-lifetime experience that the biggest investors receive. But don’t make the mistake of thinking that the perks you offer are there to drive investment on their own. Nobody invests in a company to get a hat or shirt. They appreciate getting the perks and those hats and shirts can be good marketing for your company, but nobody is making an investment decision based on getting inexpensive swag.
That being said, perks can be the thing that makes someone increase their investment to get to the next level of perks. Let’s say you offer no perks with a $250 investment, but offer a brand new to the market item that normally retails for $250 (but only cost you $25 to manufacture) at the $500 investment level. You may get people who invest $500 to get that item, thinking that they are getting something “free” in return - either the item or the additional securities. This is also an effective way to get existing investors to increase their investment later. Monitoring your investor base and sending out segmented emails reminding them that they can get to the next perks level with an additional investment – and telling them what those perks are – can drive additional investment. This is especially effective at the end of an offering when FOMO kicks in.
But keep in mind, this will not work as well if you have not been keeping in touch with your investors and keeping them informed. If someone invests, then they do not hear anything from you for 30 days, and you send them an email asking them to invest more – good luck getting them to pull that trigger again. On the other hand, if in that 30 days, they received a weekly email or video message telling them of your company’s latest news, showing them the success you are having and treating them like the owners that they are, you have a far better chance of getting them to increase their shareholdings.
One last word on perks: you must fulfill the perks when you say your will. Not only could you get into legal trouble by not doing so, but you will lose investor confidence – and thus lose their help in growing your company – if you do not timely send them what you promised them.
These Top Ten Tips and Tricks are just a few of the important parts of your equity crowdfunding marketing campaign. Each part requires a great plan, and great execution. They also all work together and help drive eyeballs from different approaches and angles. This is why having your team ready and prepared and engaged throughout the entire capital raise is incredibly important to your success.
One last note – remember that the rules for marketing in Reg CF and Reg A are different. For example, you cannot include the “terms of the offering” in your Reg CF marketing except on the offering page. Make sure you get advice from competent legal counsel for all aspects of your securities marketing so you stay out of trouble.
This article is not and should not be considered legal advice. Yes, I am a securities lawyer but no, you did not hire me to provide you with legal advice. In all cases, consult with your own lawyer as every legal situation is unique and do not rely on my educational and informative article as legal advice.