So … how can you quickly and simply evaluate if an equity crowdfunding raise may fly?
Meaning it will get investors.
After overseeing 320 unaccredited investor equity crowdfunding raises totalling $142 million you get a good feel of what gets funded and what doesn’t.
This is key to any successful equity crowdfunding platform. Having just one raise or a score of unfunded raises is not a good look.
To quickly assess fundability up front you need a framework.
Just over a year ago I wrote …
Title III still isn’t with us yet but unaccredited equity crowdfund investing is in a few countries with many more to follow.
In the article I used a variation of my fundability circles diagram. In the last year it has been updated considerably as I’ve been more involved with incubators and accelerators.
Each of the circles reflects a strong success pillar.
- A Story told with clarity. It needs to be convincing, compelling andcredible
- An enthusiastic, grounded Team. It needs to be a balanced (Steve Jobs and Steve Wozniak), passionate, capable and likeable Team.
- And Supporters who believe in what you are doing. There needs to be lots of suitable people to share the story with and engage with.
In addition it is at the intersection of the circles that a simple check reinforces the overiding strength of Story, Team and Supporters.
- Relevance. The story being pitched needs to be relevant to the supporters of the product, the service, the technology, the team, the geography or for whatever reason they are “supporting”.
- Capability. The team must be capable of implementing the story they are selling.
- Credibility. The supporters need to see the team as credible and worthy of their trust.
You can work out your own scoring depending on the weight you put on each part but I usually rate the conversation or pitch out of 50 as follows …
Only once have I had an entity that I straight up awarded 50 out of 50 and they subsequently raised they managed to get investors and get the funds they needed!
Under 35 points suggest tell the team to go away and get stronger. You can easily show them on the venn diagram where they need to improve. Its a waste of everyone’s time and money to onboard those not credible enough yet.
This will be even more essential with Title III as Title II and Title IV raises are predominantly evaluated through accredited investor criteria which is usually figures based and fairly analytical.
How to use the Fundability Circles
- As you are being told the story or are being pitched listen for elements of Story, Team and Supporters.
- If you don’t get the info you need to get a representative score start asking the questions around the diagram.
- Once you have sufficient information fill in the scores and add them up.
Paul Niederer is one of world’s leading authorities in equity based crowdfunding investments and raisings and constructing collaborative funding solutions. He has personally been involved in over $75 million of transactions with 90 different companies seeking capital.
With the intense interest worldwide in EquityCrowdfunding Platforms, and Collaborative Funding Platforms Paul is involved in consulting to a number of parties on how to structure their funding portals, processes and regulations to have successful raises with a fair deal for investors and stakeholders.
He regularly presents seminars on on a number of topics including Collaborative Funding, Crowdfunding in 2020, Investor Crowdfunding: How to run and manage your own platform compliantly and successfully, The Democratization of Capital – Why it is happening now and how to handle it and Executive and Management Briefings on Crowdfunding.
Paul has spoked at a number of events worldwide including the annual Crowdfunding Bootcamp in Las Vegas, the Crowdfunding Asia Summit in Singapore, INSME Academy’s “How Small Businesses Can Embrace Crowdfunding for Success!”, the WASME 19th International Conference on SMEs in Durban, the Crowdfund Investing Innovation Forum in Orlando with the topic “Fraud and the Crowd” and an International Business Angels Event in Amsterdam.
His experience is with both accredited and unaccredited investor raises. While many jurisdictions have platforms running with only accredited investor raises Paul has had extensive experience in managing both accredited and unaccredited raises with both investor types often in the same raise. Internationally he is known as “Mr Governance” due to the fraud free reign he managed while day CEO of ASSOB, the world’s oldest equity crowdfunding platform. He as spoken in minimising fraud in equity based crowdfunding transactions a number of times.
Paul lives south of Brisbane on Australia’s eastern coast and relishes the opportunity to discuss peer to peer finance developments and any moves towards the democratisation of capital.