How long does Equity Crowdfunding Take?

It's one of the handfuls of questions I'm asked by founders who are considering Equity Crowdfunding as a way to raise capital.

Currently, you can't order a Tesla and pick it up tomorrow. There's no Amazon Prime next-day delivery for your home equity line. Nor is there same-day approval when applying to Harvard University.

According to a Timex survey,?Americans?wait:

?? 20 minutes a day for the bus or train

?? 32 minutes?whenever they visit a doctor

???28 minutes?in security lines whenever they travel

?? 21 minutes?for a significant other to get ready to go out

?? 13 hours?annually waiting on hold for a customer service

?? 38 hours?each year waiting in traffic

?? Those living in big cities wait in traffic more than?50 hours?annually

All of this equals about?37 billion?hours each year waiting in line somewhere.

Human beings?spend approximately?6 months?of their lives waiting in line for things, which means like?3 days?a year of waiting.

Gaining access to funds to help your company grow is important, for some, it's a lifeline to keep the company afloat (if this is you, equity crowdfunding is not a wise choice). So it's more than reasonable to want to know how long a typical campaign is.

Kingcrowd , a leading website that provides trusted insights, analytics, and ratings to help investors maneuver through the market of startup investing and vet private market deal flow, examined equity crowdfunding duration this week.

They examined all Regulation Crowdfunding (Reg CF) and Regulation A (Reg A) equity deals that have closed from the beginning of 2018 to July 2021, which?included 1,306 funding rounds. (Note: this likely represents fewer than 1,306 companies because it includes repeat raises).

The time length with the highest number of rounds was between 91 and 180 days. Nearly 530 raises fell into that duration. However, this particular time length does not hold a substantial lead. 400 rounds lasted between 31 and 90 days and nearly 350 raises that went longer than 181 days. A clear takeaway from their data is that not many rounds last for less than 31 days. Since 2018, only 29 rounds have closed in a month or less.

This research by Kingscrowd got me thinking, what do the funding portals themselves say the average ECF timelines are?

I found this handy image online of what a sample timeline could look like on Republic. However, none of the three largest platforms state their average campaign duration or what a founder can expect in a typical round.

That's because each campaign is, in fact not typical.

StartEngine states on their learning center, "The timeline is completely dependent on how much time and expertise the company has to devote to creating a campaign, how much money they are trying to raise, when they file, etc."

Wefunder, which has very clear and easy to follow guidelines for founders and investors, doesn't seem to discuss a campaign's duration at all.

Much respect for all three companies as they've hosted 80% of all funds raised via Regulation Crowdfunding (Reg CF) in 2021 ($225,168,860 out of $278,067,294). Every campaign is different just as each company is unique.

Raising more than $115 million via crowdfunding and digital marketing while managing more than 100 campaigns, the Arora Project should be able to give more insight on this. So no worries Wefunder, Republic, and StartEngine, I got you on this one.

Founders, whom Arora Project has engaged with on their quest to raise capital via equity crowdfunding before March 15th, 2021* have successfully met or exceeded their fundraising goal, on average within three to four months.

*Until March 15, founders were only able to raise a maximum of $1,070,000 from the crowd (unaccredited investors over the age of 18). Since then new regulations have allowed companies to raise up to $5,000,000 over a 12 month period.

This is not to say founders are unable to see the same success managing their campaigns on their own. I've seen plenty of entrepreneurs and companies with killer videos, decks, clear narratives, and large communities go on to raise millions. Most founders, however, have their hands full enough running their company let alone fundraising millions of dollars.

Running an equity crowdfunding campaign is a full-time job.

The first four weeks of a campaign is the most important stage. This is the period of time a founder needs to file the proper forms, accounting reviews or audits, design and publish the campaign page, film and produce the campaign video, identify the right audiences for the digital ads you'll be marketing, set up advertising and email campaigns in advance, raise your friends and family round, choose a lead investor, initiate coverage of your campaign, launch your campaign, and this is only preperating for your raise.

See what I mean? It's a lot.

We've seen some of our client's campaigns almost fill up within the first three days while others have taken six months. There is no way to exactly set expectations of a certain timeline. All things considered, having the data to help determine how, when, and where to activate and operate things for a campaign helps you determine best practices.

All of our decisions at AP are data-driven. And with each additional campaign (currently managing 60+ active and prep-phase campaigns) more data is collected to learn from.

What has worked, what hasn't. Which audiences reacted to the flow of the campaign page, and which have been ignored. Which type of digital ads directed the most traffic to your page, how many converted into investments, and which were duds.

Okay, be honest....

What was the first thing that popped into your head seeing this product?

Espresso maker? The latest Kuerig machine model? European manufacturer of Chai Tea?

All of these are actual guesses of entrepreneurs.

A good example of "you never know" is CLICS - A digital hair color mixing system helping salons reduce cost and waste celebrated in November 2020 reaching $276,000 within the first week of launching their raise.

By December they surpassed $300,000 just under 30 days of going live.

And at the end of January 2021, they announced they received a $1 million dollar investment into their Wefunder campaign.

Prior to March 15 of this year, this was unheard of happening. Uncommon but not impossible, it's our only client that this has happened to and probably the first ever or perhaps at all on Wefunder.

Yup.

Founder Leilani M. Macedo and CEO Charles Brown raised $1,467,485 from just 256 investors last February. (Makes you think that idea of yours actually has a shot, no?)

I love this client's campaign not because of the $1M investment, rather because it supports what I tell every founder I have an initial call with.

It doesn't matter what your product does, or what service you provide. If your company provides value that is able to connect with the reatil investor market; with the right strategy, you can raise capital.

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