Equity Crowdfunding – Part 4 of 20+ Series – Identifying Investor Candidates

In this fourth installment of my series on equity crowdfunding, I will focus on the challenge of identifying investor candidates within the limited context of equity crowdfunding and using the illustration of the equity crowdfunding of Greens Gone Wild. The Greens Gone Wild offering memorandum, Form CF-2 Disclosure Statement, and financials can all be viewed and downloaded on their crowdfunding page at CrowdSprouts.

As I posted in my article on LinkedIn a few weeks ago about equity crowdfunding, $298 Billion Short of Potential, I believe that equity crowdfunding has failed to reach its true potential because most crowdfunding campaigns target wealthy people as investor candidates.

I believe that the single greatest error of entrepreneurs in raising capital is pitching to investor candidates who will never invest. This typically results in a waste of the resources of the small business until the campaign fails which may be shortly followed by the failure of the business.

Within my Motivated Money Method of raising capital, I focus on investor candidates who are most likely to invest based on the level of their self-interest. In the same way that each small business is unique, I believe that there is an equally unique single optimal investor candidate or group of optimal investor candidates. The key to success in raising capital is determining who is most likely to invest in any particular business at any particular time and set of market conditions. With knowledge of the optimal investor candidates, everything else flows from there. The offer(s) is crafted to match the investor candidate. The campaign plan is executed to place these customized offers in front of the identified investor candidate where the offers may be seen, evaluated, and acted upon.

With these ground rules in place, the capital campaign plan of Greens Gone Wild may serve as an example.

The identification of investor candidates for Greens Gone Wild starts with the identification of all possible investors and determining what benefit they may derive from an investment.

?This chart shows many groups or classes of investor candidates for Greens Gone Wild. For simplicity, I placed stakeholders on the left, ROI investors on the right, and customers on the bottom.

For a variety of reasons, I discounted the motivation of all the investor candidates on the right:

·?????? Young business

·?????? Never earned a profit

·?????? Part-time management

·?????? Product is in a highly competitive market

For the same and similar reasons, I discounted the motivation of all the investor candidates on the left:

·?????? Small volume of material purchases

·?????? Small volume of taxes paid to local governments

·?????? Small employment footprint

This left Greens Gone Wild with an investor candidate group comprised of its existing and future customers – both consumers and resellers. This is the situation in which I find most new small businesses that are growing but have not yet reached a level of size and profitability to meet the criteria of banks, angel investors, or investment programs or funds that have a low-risk tolerance and/or limited funding. These small businesses simply cannot compete well for funding at this stage in their business life.

It is important to understand this selection process in more detail with full understanding achieved after consideration of what investment offer may be made by a small business that matches the motivation of each type of investor candidate. Over the next several days, I will assess the investment motivations of the following groups of investors:

·?????? Wealthy people

·?????? Consumers

·?????? Resellers

·?????? Suppliers

·?????? Government

·?????? Community

·?????? Causes

·?????? Allies

·?????? Competitors

Example: A small business determines it needs to raise money to grow its operations. In addition to all of the common return on investment investor candidates, the small business completed an analysis of its stakeholders who stand to benefit from the success of the business without making any investment. Although the small business does not forecast future profits sufficient to attract investment solely based upon ROI, the small business expects to create many new jobs much needed in the community as large businesses have closed their doors. This indicates that local businesses, government programs, and community organizations may have enough motivation to make funding available.

?Exercise: Take the Greens Gone Wild chart and modify it to your business to identify all possible groups of investor candidates. ?

?Upcoming Appearances

?I will join a group of speakers at SuperCrowd Hour tomorrow January 17, 2024, at 1 pm EST. We will share information on crowdfunding, impact investing and the potential of equity crowdfunding to reach $300 billion.

?https://thesupercrowd.com/17jan24

?Past Appearances

?I was a guest on Grow Money Business podcast with Grant Bledsoe where we talked about the challenges of small businesses raising capital.

?https://podcasts.apple.com/us/podcast/best-practices-for-raising-capital-with-karl-dakin/id1489821030?i=1000641138000

?I was a guest last Wednesday on Don Cohen’s Hour of Empower where we talked about the importance of projections in small business success.

?https://www.dhirubhai.net/video/live/urn:li:ugcPost:7150879258117070848/?msgControlName=view_message_button&msgConversationId=2-ODM2NDkwMzktNjQxMi00MDQ3LWFlZDAtZTUwZGRhMDhlNDkxXzAxMA%3D%3D&msgOverlay=true

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Karl Dakin, the Capital Coach

Dakin Capital LLC

[email protected]

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