Emerging Markets Law

Top Tips for Crowdfunding Campaigns under Title III of the JOBS Act

I was recently asked to pull together some top tips for crowdfunding campaigns under Title III of the JOBS Act. Here are some of the top tips:

  • Find a way to tell your story – Crowdfunding investors are really looking for financial statements and revenue numbers; they can go to public companies for that. Crowdfunding investors are looking for a story that inspires them to believe that the company might be the ‘next big thing.’
  • Invest in the effort to tell your story well – Lawyers, accountants, and other professionals are indispensable when it comes to getting a company ready to sell its securities to investors. If you would not perform open heart surgery on yourself, why would you try to act as your own lawyer? If you believe that your company has the potential to be the next big thing, act like it by hiring professionals who can help you.
  • Let your story tell itself – Crowdfunding investors are not going to be impressed by your claim to be the next big thing. If your company truly has the power to disrupt the market for XYZ, provide hard facts and testimonials from customers, vendors, and others that support that conclusion. 
    • Which of these claims is more impressive to you?:
      • Self-promotion: XYZ cupcakes are the greatest cupcakes effort and will dramatically disrupt the cupcake market!
      • Testimonial: Suzie Johnson, Professor of Baking at Cordon Bleu Culinary Academy, says, “In my 30 years of baking, I’ve never tasted a cupcake better than XYZ cupcakes.”
      • Factual: To demonstrate how great XYZ cupcakes are, we conducted a blind taste test at the corner of 50th and Fifth Avenue in New York City on February 25, 2016. We gave samples of XYZ cupcakes and another leading brand to 500 passersby, who were then asked to rate the two samples. 495 of the 500 tasters claimed that XYZ cupcakes were better?

The theory behind crowdfunding is that a crowd of individuals with access to information will be better-situated to make a prediction about the future than a single expert. If that’s true, then crowd-tested claims about your product and your potential for success should resonate better than any claim you can make and any single expert’s endorsement.

  • Take the Time to get it right – As a lawyer who has been working on start-up companies for 25 years, I can tell you that it always takes longer than you think. Let your professional develop a work plan for your crowdfunding effort but be sure to add time to your plans to respond to unexpected developments. It’s going to be a rush but make sure to take the time to get it right.

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