Small Business: Equity crowdfunding

Linda Bulk is general manager and a director of Aeronavics. The Raglan-based drone manufacturer raised $1.5 million through an equity crowdfunding campaign last February with 213 investors taking a total 15 percent stake in the company.

This week, small business editor Caitlin Sykes talks to business owners about equity crowdfunding.

Why did you decide to go the equity crowdfunding route for your initial capital raise, as opposed to other funding channels?

We had actually been preparing for a capital raise for a while through more traditional methods, so we were already creating investment documents to approach the angel investment network. But then the first equity crowdfunding platforms started gaining their approvals and it was natural for us to start talking to them because we really loved the idea. We were already on the path to being investment ready, so we were lucky to be able to divert our efforts into equity crowdfunding.

There is such a great crowd of passionate people around our industry, and this kind of funding gives them the opportunity to be involved and put their hearts into your project. We liked the concept because of the emotional investment that you gain from shareholders in both the company and the brand. We imagined these shareholders would be like ambassadors who would be excited about our products and talk about Aeronavics.

When you’re actually running one of these campaigns, you’re very exposed because you’re putting your hearts and aspirations out there, as well as how you’ve been doing as a business, so you do feel very vulnerable. But we were determined that that was what we wanted, and we have a very transparent culture as a company anyway, so it was such a joy to see the way people responded.

Many of these campaigns don’t make it across the line to be fully funded. What factors do you think made yours successful?

I think one factor is our product. It’s a very appealing product, and more generally I think technology products tend to do well in crowdfunding because people can relate to them and feel it’s a growth area.

The other factor is we’re very passionate about what we’re doing, and I think that came across really well when people looked at the investment material we produced. People need to believe in what you’re doing and want to be a part of that. We learnt through the process that really thorough preparation is important, and making sure the information you provide is accurate enables the process to run smoothly. Also, focusing on documentation and making sure the investment memorandum and promotional video are well presented and informative gives potential investors confidence in the company.

It did take us a long time to prepare, but it still was a very intense time. Sometimes I’d literally be working around the clock, balancing the campaign with my normal workload. It’s quite challenging so I can’t stress enough how important it is for companies to prepare well in advance.

What are some of the other issues related to the process that you think other business owners should be aware of?

Business owners do have to understand that accountancy requirements change as the amount of shareholders increases, so that is something to be considered. For us this hasn’t meant a lot of change though as we’re in preparation for global growth and have already adopted these standards.

Also, although we’ve found equity crowdfunding a fantastic method for a first round capital raise, we do recognise that other types of investment partners can add a different value to the company – like adding skills and experience or offering potential pathways to market. Because of that, for our current B round capital raise we’ve chosen wholesale investment only.

NZ Herald

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2021-10-19T04:11:01+13:00April 10th, 2016|General|

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