I have been asked by many of my colleagues for a simple checklist on how to prepare a food company to do an equity crowdfunding raise. Here are five tips specifically tailored for consumer packaged goods’ companies.
1. Prepare your Company to Offer Shares and Gain Outside Shareholders:
The first step is to hire an outside accounting firm and prepare financial statements for the last couple of years of operations. The second step is to hire a securities lawyer to draft a proper shareholders agreement, which will contemplate how to operate the company after the offering, and what rights new shareholders will have in the Company. Your attorney should also help in preparing some form of offering document, as well as a subscription agreement through which investors will purchase their shares in the company. If you expect to gain many new shareholders, you should also consider engaging the services of a company to manage your investor communications, and information sharing pre-and post-offering, as well as a transfer agent to handle the shareholder registry in book-entry form rather than having the Company issue and manage physical share certificates itself.
2. Make sure that your Company really owns all of its food recipes and trademarks
Before you launch your offering you need to make sure that all of your product recipes are actually owned by your company. This means that all of your products need to have been developed by employees under an employment contract that states that all of the products that they develop for the company, belong to the company, or you need to sign an assignment agreement with all employees and/or consultants who developed products for you under which they assign all of their rights to such products to the Company. You also need to verify that you have registered all of your brand names and other word marks and logos with the US Patent and Trademark Office and that those trademarks are registered in the name of the company and not in the name of a shareholder or employee of the company (in which case they need to be assigned back to the company).
3. Prepare the Company’s Social Media to Publicize the Offering and Hire a PR Company:
The third step is to prepare all of your Company’s social media properties: Website, Brand Blog, Facebook, Twitter, LinkedIn, Instagram for the offering of the securities. In our case we, we decided to continue to use our Blog, Facebook, and Instagram pages exclusively for our brand, and to only use Twitter and LinkedIn as the platforms for the offering. On our website we decided to only add an Invest in WAFULink, which would link to the equity crowdfunding sites managing our offering in the US and Canada. In addition to preparing our social media properties for the offering, we also retained the services of a financial PR firm (Leverage PR in our case) to help us to draft and distribute our press releases and help us to come up with and execute a PR strategy for the duration of the equity crowdfunding round. You should also consider engaging in supported Twitter and/or LinkedIn campaign (i.e. paid campaigns) to further magnify the reach of your posts on Twitter and LinkedIn.
4. List your offering on a proven equity crowdfunding site and produce a very good equity crowdfunding video:
The fourth step is to list your offering on a reputable equity crowdfunding site with a proven track-record of successfully raising money. In the United States we choseCircleUp which is the premier accredited investor equity crowdfunding portal for consumer goods in the United States. CircleUp has helped companies to raise more than $40 million from accredited investors in the United States. It also has a growing list of big name companies including Virgin America, Johnson & Johnson and Proctor Gamble that invest on companies on their platform. Then you need to produce a very good video, which is probably the most important part of any crowdfunding campaign. Your video really has to be really good. For WAFU’s crowdfunding video, we engaged the services of one our designers in London, who also had experience in film and advertising. The key is to tell the story of your brand and your founders in a way that normal people can relate to and that allows potential investors to develop an emotional bond with your brand and your company.
5. Make sure that you are set up to be able to send many samples to potential investors
The second most important part of any equity crowdfunding offering for a food product is the food product itself. Therefore, you need get yourself set up to be able to send samples to many potential investors in an easy and efficient manner. There are two ways that you can do this, you can either hire a sampling company likeSwaggable, or you can warehouse a sufficient amount of product with a fulfillment agent like Shipwire, from which you can send lots of samples easily and efficiently to all interested potential investors. Expect to send 50 to 100 samples of your product in the first couple of weeks of the offering.
This material is intended for general information purposes only and does not constitute legal advice. For legal issues that arise, the reader should consult legal counsel.
Gil has more than fifteen years of global corporate legal and business experience, which he acquired as a corporate securities lawyer at leading international law firms in Montreal, New York and London. Gil’s corporate legal and business background includes extensive experience with cross-border private debt and equity offerings by foreign companies in the United States, as well as venture capital and private equity transactions. During the last 15 years, Gil has helped more than 70 Canadian and other non-US companies to raise in excess of $10 billion in private placements from investors in the United States. As CEO of WAFU, Gil has helped WAFU to raise more than $1 million from accredited investors in the United States and Canada, including $230,000 through the first ever U.S. accredited investor equity crowdfunding offering over the internet by a Canadian company. Most recently, Gil helped WAFU to launch the first ever simultaneous cross-border (US/Canada) Rule 506(c) / Reg. S accredited investor equity crowdfunding offering by a Canadian company, through CircleUp in the United States and Optimize Capital Markets in Canada.
A fervent believer in the potential transformative power of equity crowdfunding for small businesses, Gil sits on the board of Invest Crowdfund Quebec, an organization working for the adoption and promotion of equity crowdfuding in Quebec, and also recently agreed to act as a Crowdfunding Ambassador for the National Crowdfunding Association of Canada in the Province of Quebec.