Crains New York - August 12, 2013 - (Page 7)
SMALL BUSINESS
Crowdfunding 101: Communicate with care
BY ELAINE POFELDT
W
hen Jamie Rosen
raised
money
through crowdfunding
for
DietBetter,
a
startup he runs in Manhattan,he was
more prepared than many entrepreneurs to keep in close touch with his
investors. He had raised money for
other ventures. “People want to kick
the tires,” said Mr. Rosen.
He ultimately secured $308,000
from about a dozen private investors
for DietBetter,which offers an online
social game called DietBet, in which
dieters wager that they will lose 4% of
their body weight in four weeks and
then share the pot of money if they
do. Mr. Rosen says he has enough
time to communicate regularly with
those investors, using digital tools on
SeedInvest, the New York-based
crowdfunding platform he used, and
in one-on-one conversations and
meetings. The firm, launched in
2011, has revenue in the six figures.
Mr.Rosen is ahead of the game on
investor relations. With the Securities and Exchange Commission
gradually loosening restrictions on
crowdfunding as a financing alternative, more companies are expected to
try raising money this way. But,
experts
warn,
THINK MOBILE
many startups
Many investors
need to focus
use phones and
more on their
other devices to
keep up with their
communications
investments.
strategy with inMake sure your
vestors, and look
communications
ahead to the long
strategy
term.
addresses that,
says investorCurrently,
relations expert
crowdfunders
Jeff Corbin.
are allowed to
sell equity only to sophisticated accredited investors. However, the
SEC in July lifted a ban on general
solicitations in a decision that will allow fundraisers to spread the word
using more venues, such as socialnetworking sites, which is likely to
attract a wider pool of wealthy people with money to invest.
Meanwhile, the SEC is consid-
TIP
ering opening crowdfunding investments to the average Joe, a move
that some observers believe could
lead to communication gaps, either
accidental or intentional.
Mr. Rosen, whose minimum investment was $20,000, raised his
money on SeedInvest this past spring.
Ryan Feit,a co-founder of SeedInvest
and co-chair of the education and
training committee for the Crowdfunding Professional Association,
says entrepreneurs need to make it
clear to anyone investing in a startup
that the investments are very risky,
need to be diversified and are illiquid.
“If entrepreneurs are not forthright about it, it’s going to be a very
big problem,” he said.
Investor-relations firms are already touting their services to potential crowdfunders—and the
market is growing rapidly. Crowdfunders raised $2.7 billion globally
in 2012, up from $1.5 billion in
2011, according to research firm
Massolution.
Startups that can’t afford outside
help will need to master the basics
on their own.
Jeff Corbin, chief executive of
KCSA Strategic Communications
in Manhattan and author of Investor
CONSTANT
CONTACT:
DietBetter’s Jamie
Rosen talks
frequently with his
firm’s backers.
great content that adds
color to the numbers—
that helps me to make the
case for where the company is going and whether it’s
going to continue to grow
and my investment is going to appreciate,” he said.
Craig Sher, who raised
close to $140,000 in bridge
financing from investors
on SeedInvest for his business StearClear—a designated-driver service that
offers rides to people leaving hospitals on medication or who are otherwise
impaired—found
that
putting together a simple
PowerPoint presentation
with 12 slides in SeedInvest’s “data room” helped
address many common questions
from investors who bought convertible notes in the offering. When he
held two recent calls with them, he
said,“they were mostly asking about
exit strategy.” Ⅲ
buck ennis
Startups using new
funding platforms
must learn to talk
to novice investors
Relations: The Art of Communicating
Value, says that entrepreneurs will
have to spend time getting a correct
valuation of their businesses so they
can price shares appropriately and
learn how to communicate a company’s value outside of a thick prospectus filled with legalese.
“If I go to a company’s website
and see tons of information about its
customers, case studies, video—
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Table of Contents for the Digital Edition of Crains New York - August 12, 2013
IN THE BOROUGHS
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