Equity Crowdfunding – Part 7 of 20+ Series – Resellers as Investor Candidates

In part 7 of my series on equity crowdfunding, I will share why organizations that resell the products and services of a small business are possibly the best investor candidates in an equity crowdfunding campaign. In this examination, I will use 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.

?I see the existing and prospective customers as the most common investor candidates for an equity crowdfunding campaign. This assessment led to the design of the Greens Gone Wild campaign to focus on both consumers and resellers.

?I use three key factors in assessing the likelihood of any investor candidate to invest in a particular business: (1) do they know you, (2) do they have the funding you seek, and (3) do they have sufficient motivation?

?An existing reseller of a small business’s products or services is at least familiar with the business, thereby meeting the first factor. In many cases, they have completed due diligence on the small business before committing to resell their products or services like that of an investor candidate.

?Nearly all resellers do not view themselves as investors. The concept is not foreign to them, but investment falls outside of their standard business model – buy the product at one price and resell it at a higher price. This single motivation – making money by marketing up – works to the advantage of the small business when crafting an offer within an equity crowdfunding campaign.

?When considering a reseller as an investor candidate, the small business must honestly evaluate its importance to the reseller. If the reseller is selling hundreds of millions of dollars of products and services from many, many sources, then the contribution of a particular small business may be minimal. Likewise, if the reseller is selling products and services that compete with those of the small business, then the reseller may view the small business as a substitutable commodity. The reseller is focused on making more sales and earning a higher profit margin.

?Winning a reseller as an investor candidate may yield huge returns. Resellers are large purchasers. The time and energy within a sales cycle to gain a reseller as a customer will pay a higher return than the investment in gaining a single consumer customer. As determined within the Greens Gone Wild crowdfunding campaign planning, it may be much easier to attain its capital campaign goal of $200,000 by getting investments from a smaller number of resellers.

?Like consumers, the reseller may have little or no interest in investing in the small business. However, the reseller will be attracted to a sales bargain. Resellers, like consumers, understand a good deal. The challenge becomes to craft an offer that the reseller cannot refuse or can at least justify their investment decision.

?The Greens Gone Wild equity crowdfunding campaign was designed as a two-purpose campaign that placed the marketing purpose ahead of the purpose of raising capital.

?Experts disagree on whether it is better to build sales through selling directly to consumers or by building a distribution network of retailers. An equity crowdfunding campaign can be designed to do both.

?Example: A small business decides to raise funding through crowdfunding. The small business already had established several resellers. The business talked to several prospective resellers about how the conduct of the crowdfunding campaign could serve to mutually build each other’s brand. This design of the campaign enabled the reseller to sing the praises of the small business to each of the customers of the reseller, thereby greatly expanding the reach of the small business to possible consumer investor candidates.

?Exercise: Consider how conducting an equity crowdfunding campaign can help your existing resellers.

?Past Appearances

?I participated in a panel on investing through equity crowdfunding on the SuperCrowd Hour moderated by Devin Thorpe. This was a great discussion with people who are ranked as knowing the most about equity crowdfunding.

?https://lnkd.in/gwvq7cw2

?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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