In this session, we will discuss how to run a crowdfunding campaign including preparing for the campaign and executing it.

1. How to Use
Crowdfunding to Fund
your Startup
Hall T. Martin
Texas Entrepreneur Network, Director
txenetworks.com

2. Agenda
Crowdfunding– what it is and how it works
Type of crowdfunding sites
Elements of a crowdfunding program
Five most common mistakes in crowdfunding
Three critical elements to crowdfunding
Q&A

3. My background
Angel investor for over 10 years
Started three formal angel networks
Coached hundreds of companies
Helped entrepreneurs raise over $50M in
funding

4. What is crowdfunding?
Sourcing funds for a startup through the internet
It is a new source of capital
The funding comes in smaller increments but from
more investors

5. How does crowdfunding compare?
40+% of posted projects to crowdfunding sites get
funded
15% for angel deals
1% for venture capital deals

6. How does it work?
1. Choose a crowdfunding site based on your project
2. Submit your application with target funds sought &
timeline for the campaign
3. Launch your campaign
4. Promote your deal to your network
5. Respond to questions and feedback
6. Raise your funds

7. What is the JOBS Act of 2012
Jumpstart Our Business Startups (JOBS)
Signed into law April, 2012
Allows anyone to invest in startups for
equity
Goes into effect early 2013

8. What does it mean to you?
Small firms can now raise up to $1M without
having to register with the SEC
Non-accredited investors can invest for equity
There will be some limits based on annual
income.
“Funding Portals” will act as broker/dealers to
ensure compliance

9. Benefits of crowdfunding
Raise funding for your project
Check the market’s interest in your project
Create potential customers and enthusiasts
Build your network
Raise awareness for your cause
Create some buzz around your pre-market product

10. Risks in crowdfunding
You may not reach your funding goal
The process takes substantial time commitment
Your project may take more funding than raised
Personal exposure is high

11. Crowdfunding models
There are four models
Rewards/Pre-payment
Equity
Peer to Peer lending
Donations

12. Reward/Prepayment Sites
Offers rewards to donors
Examples include
Kickstarter -- http://www.kickstarter.com/
RocketHub--http://www.rockethub.com/
IndieGoGo--http://www.indiegogo.com/
Cost: 5% to 12% of funds target

13. Equity sites
Offers equity to investors
CircleUp--http://www.circleup.com
Crowdfunder--
http://www.crowdfunder.com
Cost: Typically 10% of funds raised
Others
TEN-- http://www.txenetworks.com/

14. Peer to peer lending sites
Facilitates peer to peer lending
Lending Club
https://www.lendingclub.com/
Somolend
http://www.somolend.com
Cost: Varies based on terms and credit history

15. Donation Sites
Microlending to startups through donations
Kiva -- http://www.kiva.com
CauseVox --http://www.causevox.com/

16. One more option
You may use your own website
The initial traction comes from your network
With the right PR/social media skills you can drive
traffic to your site
There are no fees to pay

17. How much can you raise?
There’s no limit
For reward sites most raise $2K to $20K
For equity sites most raise $100K to $500K

18. Timeframe and Funds Target
You specify a target fund raise amount and
timeframe
Some sites require you to raise the entire amount
Most deals raise their funding within 30 to 60 days

19. Donors vs. Investors
Donors -- receive cool perks (music downloads,
sample product, naming a cupcake after you)
Investors – receive an equity stake in your business

20. Crowdfunding campaign
Pitch Video
Description
Images
Biography
Funds Target and Timeline
Rewards offered

21. Making a pitch video
Outline the points you want to make
Your pitch should include:
What you are doing
How much you are raising
Where the campaign will be held
When the campaign will close
Why the viewer should care

22. Making a pitch video
Keep it short – 2 to 3 minutes only
Make sure the audio is good
Use a high quality Lavalier microphone
Record in a quiet place
Practice your pitch multiple times and make multiple
shoots
Consider using other video to highlight your project

23. Choose a proper setting
Consider the background and how it affects the tone
of the presentation
Choose a setting away from distracting background
noises

24. Make your pitch compelling
Show the human side of the project
Show your passion
Show how the project delivers a positive outcome
Demonstrate your unique talents and skills
Create a sense of urgency
Show how the project promotes a greater cause

25. Description
Create a five word tag line describing the project or
company
Ex: “A satellite webcam for penguins”
Use compelling headlines
Use descriptive words

26. Description cont.
250 word description of the deal including
What it does
Why it is important
How you will accomplish it
When and where you will accomplish it
What is unique about it
How much backing is required

27. Images
Need to be high resolution photos
Clear and crisp images

28. Biography
50 to 100 word description of yourself
Demonstrates your capability and experience

29. Fund Raise Target
90% of projects reaching the 30% funded mark go all
the way to the goal
21% of all projects never get off the ground
70% of the pledges come from those directly engaged
by the originator

30. The U-shaped Funding
Most of the funding will come at the beginning and
the end of the campaign
Creates a U-shaped effect
Your network will comprise the first portion
People you don’t know will comprise the last portion

31. The Rewards
Projects get funded because the donors--
Like the project creator
Share the passion of the project
Seek the rewards on offer

32. Campaign time commitment
Pre-Campaign— start 3 months before launch
Develop descriptions, videos, etc.
Alert your network
Campaign—30 to 90 day campaign
Daily Execution—expect 3 to 4 hours/day
Post-Campaign—1 month follow up work

33. Pre-Campaign
Prepare your network
Identify core & secondary network contacts
Identify your evangelists & fans of your project
Line up PR contacts for broader exposure later
Setup blog/twitter/Facebook pages
Identify relevant blog sites
Identify broader media targets for PR

34. Five most common mistakes
1. Not making the pitch compelling enough
You need a great team doing something great
Mediocre projects don’t attract much attention

35. Five most common mistakes
2. Not promoting the pitch through blogs, emails &
social media
Engage your network to start
Leverage your social network to expand
Develop and run a broader PR campaign

36. Five most common mistakes
3. Not demonstrating a detailed plan
You need to show how the funds will be used
The plan needs to look realistic and achievable
Vague or fuzzy plans do not get funded

37. Five most common mistakes
4. Not asking for realistic amounts of funding
You need to raise enough funding to accomplish
the project
Asking for too much or too little will kill the raise

38. Five most common mistakes
5. Not responding to questions nor asking
for feedback
Respond to questions quickly and with
competence
Start a dialog and then build a relationship
with the investor

39. Three critical elements
1. Make a pitch video
- Keep it short and cover the basics
- Use high quality audio

40. Three critical elements
2. Demonstrate credibility and success
- Show use of the funds with financial statements
- Polish your online image including your social
networks

41. Three critical elements
3. Create a community with a cause
- Investors want to engage and contribute to a
community
- Donors often fund based on interest in having the
product

42. Crowdfunding
New way to raise funding for your business
Place your pitch video, project description, and
financial plan on a web portal
Leverage your network to fund it
Spiral out to the broader media to finish the raise

43. Questions

44. To learn more about fund raising checkout
txenetworks.com
and sign up in our
Connect program