What should entrepreneurs know before raising capital online?
Raising startup financing – as a first time or seasoned entrepreneur – is always rollercoaster ride even during best financial times.
There has been a lot of debate about the relationship between online and offline fundraising and whether one is more preferable than the other. We at SeedInvest believe that both methods should be used in tandem to complement each other. Online fundraising can be a great way to gather initial investor interest; however, the strongest relationships are still solidified in real life. Also, if you don’t live in traditional venture capital hubs (New York, San Francisco, Boston), then having an online presence will allow you to connect with the right investor regardless of where you live.
What is the value of fundraising online?
In today’s tech ecosystem, there has been a proliferation of capital sources available to entrepreneurs from angel investment groups, accelerators and incubators, business competitions, crowdfunding platforms, and VCs. Exploring all of these funding options can be time consuming and overwhelming, so it’s important to stay organized and focused.
By building a centralized online profile, you can perfect your fundraising pitch and leverage social validation through press mentions, awards, advisors, and other influencers. Then you can drive interest from your targeted audience to generate dialogue either online or offline in the most cost effective and efficient way. An online fundraise should always be part of your entrepreneurship tool box.
How can companies leverage general solicitation when raising capital online?
In 2012, President Obama signed the “Jumpstart our Business Startup Act” (JOBS Act) into law. This ended the ban on general solicitation, which was previously prohibited in the United States under the Securities Act of 1933. Thanks to the lifted ban, companies can publicly fundraise to online or offline investors as well as generate publicity for their businesses, establish their brand, and connect with potential customers. General solicitation means you can advertise your fundraise on your website, across social media (Facebook, Twitter, LinkedIn), shout it from the rooftop, or employ any other avenues of public advertising.
All in all you should leverage general solicitation as a new channel to find and engage with investors, customers, or supporters of your business.
What is the biggest myth regarding online fundraising?
Online fundraising is not just a back-up plan, but rather it should be considered part of a startup’s fundraising strategy from the get-go. It’s true that there is no panacea – a magical platform where you can post your company’s profile and expect money to flow freely from the sky. However, there are many great ways to leverage platforms such as SeedInvest to centralize all of your offering documents and build connections with investors so that you can get funded faster and easier than ever before.
For example, Atlas Wearables is now raising a $1.5 million seed round of which $1million has already been committed. Atlas produces a wearables fitness band that is designed not only to count your steps, sleep, and heart rate but also to independently detect and log every exercise you perform precisely enough to differentiate between push-ups vs. triangle push-ups, simultaneous vs. alternating dumbbell curls, etc., and to proactively suggest technique improvements. Atlas recently conducted a successful Indiegogo campaign, with more than 4,000 units pre-ordered and $629,000 raised in 60 days, which was widely covered in the press, such as FastCompany, Techcrunch,
What does our company look for when choosing companies?
We are looking for early stage tech companies that are solving real-world problems with an innovative edge. We want to know:
- What customer pain point does your product or service solve?
- How big is the market opportunity?
- Who are your customers and how will they hear about you?
- Why will they care?
You don’t need to be generating revenue, but you do need to show proof of concept through pre-orders, customer or market traction, and/or partnerships. In addition, if you have defensive IP, domain or industry expertise, that is an added bonus.
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