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  • 15 Jul 2016 8:53 AM | Anonymous

    The passage of federal and state laws to enable investment crowdfunding has rolled back decades of restrictions on the ability of the average person, a non-accredited investor, to make investments in local businesses.  Even though it is still early in setting up crowdfunding systems and platforms, this revolution within the capital industry has been largely ignored by the 90%+ of the population who can now participate in making this type of investment.

    The reason for this failure to act may be simply that non-accredited investors do not see themselves as ‘investors’.  Investopedia defines an investor as “any person who commits capital with the expectation of financial returns”.  Does the average person fit this definition?  Do they consider themselves (their perspective, not yours or mine) investors?

    Let’s test this idea.  Go down to the shopping mall and shout out “Will all investors come here!” and see who comes running.  Probably no one.  Very few people, including wealthy individuals who meet the accredited investor criteria ($1 million network excluding primary residence or $200/year annual income) think of themselves as investors.  This is a label given to people who make an investment, but it is not a name they give to themselves.

    Since the definition of non-accredited investors was adopted, the average person has been trained, preached at and treated as though they were unqualified to make securities investments.  This practice has continued for so long that it is embedded in our culture and our thinking.

    A local business I am working with began its ‘crowd building’ efforts in support of its upcoming campaign by circulating 1500 4x6 cards that said “[New business”] will complete the last part of it’s $5 million dollar capital campaign by raising $600,000 from our community.”  Interested people were directed to the website where they could leave their contact information so that the business could send offering documents when the campaign is approved. 

    The precision and conciseness of the language used in this pitch would be commended by individuals and groups that coach businesses on raising capital.  In this case, the business quickly and succinctly stated it was raising money to start a new business and provided a call to action of going to the website and leaving information.  Only 2 people out of 1500 responded to this effort.

    In hindsight, this pitch would have worked better if it the business had asked instead:

    • Contact us now for special discounts.
    • Support us in starting our new business, contact us now.
    • Support your community, contact us to learn how.

    The average person may not consider them self as an ‘investor’, but they are consumers who are looking for a good deal, they may want to help start a local business in order to gain access to its products and services and they may see them self  as a community member who looks out for their friends and neighbors.

    The average person does not get up in the morning and start up their computer to see the latest crowdfunding offerings.  They don’t arrive at work and compare investment opportunities with their co-workers before discussing any other topic.  They do not wear ball caps that declare “I am an investor”.

    The actual description of an investment opportunity within the pitch as an ‘investment opportunity’ may have scared people away.  An investment is a scary proposition.  A classical investment offers nothing other than a possible (maybe – maybe not) rate of return (ROI) that may ‘result in a loss of part or all of their investment’.  Who needs that?  And, even if the investment looks like a sure bet, the average investor will likely invest no more than $100 that  represents all of the discretionary money they have in their pocket.  An investment of $100 is not going to make anyone rich.  So why invest?

    This question must be answered if investment crowdfunding is going to be adopted by the average person.  And, any investor pitch must tell a story of opportunity that must convey enough value to the average person to get them to write a check.

    My assessment and my approach is to combine a classical investment with a reward in the form of free or discounted products and services – something the average person would buy on a regular basis.  Think of this as an Indiegogo style pitch that has the potential to pay back the full purchase price and maybe a little extra.  The pitch should focus on the reward, not on the investment.  In this manner, the average person can make an average decision – not one that is new and different to them.  And, the business seeking investment does not have to first educate and convince the non-accredited investor that they are an ‘investor’.

    This issue and related challenges to successfully completing an investment crowdfunding campaign will be the subject of upcoming workshops (July 21, August 25 and September 22) and a book on Customer Crowdfunding by the Colorado Capital Congress that will be presented at Colorado Lending Source.  More information and registration can be completed at http://www.coloradocapitalcongress.com.

    Karl Dakin

    Dakin Capital Services LLC

    7148 S. Andes Circle

    Centennial, CO 80016

    720 296 0372

    kdakin@dakincapital.com


  • 09 Jul 2016 4:45 PM | Anonymous

    A recent article in the Wall Street Journal discusses a growing negative image of investment crowdfunding. [Few Small Businesses Take Advantage of Mini-IPOs -http://www.wsj.com/article_email/few-small-businesses-take-advantage-of-mini-ipos-1467834213-lMyQjAxMTE2MzA4NzIwMzc5Wj.  Reality is starting to set in on the hype around raising money through new vehicles created by changes in federal and state laws.  Businesses are starting to recognize that ‘money does not fall from the cloud.’ 

    When the JOBS Act was first proposed, it heralded a roll back in securities regulations.  Until that time, the average person was practically barred from investing in small businesses.  It was anticipated that reduced regulations would lead to businesses raising lots of money that would lead to massive increases in employment that would lead to addressing the economic recession.  That has not happened. 

    Almost all investment crowdfunding has involved only wealthy individuals investing primary in real estate.  To the extent that this crowdfunding is taking place, this is good.  But, it misses the target and the massive economic potential of non-wealthy individuals investing in local businesses.

    The Wall Street Journal article suggests that businesses are not prepared to do the marketing necessary to attract investors.  Raising money is never quick and never cheap.  Crowdfunding offers a business the opportunity to engage in ‘do-it-yourself’ (DIY) money raising as an alternative to using a broker/dealer.  This approach may reduce the cost of raising capital.  It may also improve the probability of successfully completing a capital campaign.  However, the business must assume responsibility for marketing and that work never goes away.

    If a business seeks to raise money through crowdfunding from angel investors, it will need to practice the same marketing activities used by broker/dealers.  This involves building relationships and depending upon the ‘old boy network’ for referrals and introductions.  This takes time.  The average time to meet an investor candidate and to close an investment is six months.  During this time, it is necessary to keep the candidate informed, to build credibility and to demonstrate capability.  The great time and cost to achieve this outcome is one of the reasons why broker/dealers are not inclined to raise money in small amounts.

    If the business seeks to raise money through crowdfunding from non-wealthy individuals, it faces a number of different challenges in addition to that of building relationships.  They may:

    • Be accustomed to making investments in blue chip businesses who are household names on stock exchanges where stock can be bought and sold in the same day
    • Have little money to invest
      • Need money for groceries
      • Cannot afford to invest if there is any possibility of losing any of their money
      • Have their money tied up in a retirement account
    • Need the ability to get their money back in a very short period of time
    • Have no skill, training or experience in evaluating the merits of a business
    • Not care about supporting a business just because it is down the road – having no understanding between shopping at a local business and a national big box store
    • Not care about supporting any business – having no understanding of the relationship between funding businesses and supporting the economy
    • Understand business and where products and services come from
    • Think business is bad
    • Think a business should not make a profit
    • Know the business owners and not want to threaten that relationship by investing

    In considering this partial list of reasons why non-wealthy people may choose not to invest, it should not be surprising that businesses have not successfully raised capital by simply posting up their offering on a website.  Not everyone will invest. This appears to be the biggest misunderstanding about crowdfunding.  Just because there are more people, does not mean necessarily that there are more prospective investors.  A business will need to identify those people who can and will invest.  More specifically, people who need to make the investment – a true ‘crowd’ and not just everyone with an email address. This will require an orchestrated promotional effort that will require planning, talent and money.  It cannot be achieved by spamming people that the business does not know with social media.  A business must understand the mindset and motivation of those people who may invest.  Basic marketing.

    Once a ‘crowd’ has been identified, more work is required in order to obtain an investment. A minimally viable product (MVP) for an investment must include:

    • An offer of something that will convey value
      • The receipt of value must be reasonably certain
      • The receipt of value must be reasonably soon
    • The description of the investment must be understandable
    • The offer of the investment must establish confidence and trust in the business
    • The offer of the investment must make it simple and convenient to make the investment decision

    The offering of an investment must be placed within a channel of communication where people commonly obtain information or participate.  People who do not commonly invest are not going to surf a number of websites and sort through a number of listings to find an investment.  Just like any website for any business, people must be encouraged to go to the platform site with a clear understanding that they have an opportunity to obtain the value they need by making an investment.

    Common sense makes investment crowdfunding understandable.  The time, cost and complexity may make investment crowdfunding a lesser choice over other sources of funding for any particular business at any point in its life cycle.  A business must analyze its options and choose a capital strategy that will best fulfill its mission.

    This fundamental approach to investment crowdfunding will be presented in a workshop on Customer Crowdfunding by the Colorado Capital Congress on July 21 at Colorado Lending Source.  More information is available at http://www.coloradocapitalcongress.com/events

    Karl Dakin

    Dakin Capital Consulting LLC

    7148 S. Andes Circle

    Centennial, CO 80016

    kdakin@dakincapital.com


  • 20 Jun 2016 9:43 AM | Anonymous

    Nearly all startups will require capital resources at some point between conception of the opportunity and successfully attaining profitable operations.  Even then, additional capital resources may be required for growth.  All organizations will benefit from development of a capital strategy as a component of business planning.  This capital strategy will serve as a funding road map that can guide founders as they must make multiple decisions on when and where to raise capital.

    Two inter-related key factors in creating the capital road map are risk and the price of capital.  The higher the risk, the higher will be the price of capital.

    Risk represents the threat that a startup organization will fail to succeed and will be unable to payback investment or generate desired rates of return on that investment.  At the commencement of any business, the risk is high.  If a business is able to attain a number of key milestones, this risk will diminish.

    The price of capital represents the interest rate, share of profits or royalties or other compensation given to the investor of the capital for its use in the business.  Different sources of capital will charge different prices for the same amount of capital for the same opportunity.

    Basic capital management strategy dictates raising as little capital as necessary during the early stages of a new business when risk and the price of capital are high.  The business plan will guide the organization into quickly attaining those milestones that clearly demonstrate a reduction in risk, thereby enabling access to capital at lower prices.

    Common milestones include:

    • Validation of technical efficacy – the product or service works and will convey a benefit to the consumer
    • Validation of economic feasibility – the product or service may be produced and delivered at a cost below the price that the consumer is willing to pay
    • Establishment of a management team – the opportunity is under the control of a group of individuals with the necessary skills to advance the concept to the point where revenue can be generated from sales
    • First Dollar Revenue – an event where the organization first sells a product or service and collects payment
    • Breakeven Operations or Positive Cash Flow – an event where the organization has completed sufficient sales that total revenues received match total costs of operations

    Starting with a concept or idea, an opportunity progresses through a series of stages: beginning  with a concept and progressing to profitability.  The common observation is that an idea has no value because it has not yet been tested.  Many ideas prove to have value in that they can provide benefit to the consumer when sold as a product or service, but the cost of producing and delivering the product or service to the marketplace is so high that no one can afford the price and therefore the idea is not economically feasible. 

    An innovation remains only an opportunity until a management team is recruited to operate the organization.  The capabilities of the management team are the single greatest factor in reducing risk of bringing an innovation to market.  All opportunities remain theoretical until a first sale occurs and revenue begins flowing into the organization.  Risk falls dramatically at achievement of this milestone.  And, finally, the last major milestone is achieving economic sustainability – breakeven - by generating revenues equal to cash outflows.

    Upon achieving each milestone, there is a broader selection of capital sources that are willing to assume the risk of making capital available to the organization.  Therefore, like any commodity, the price of capital falls.  Between concept and profitability, the price of capital shifts from an immeasurably high percentage of future profits to well established prime lending rates.

    The capital strategy should anticipate each change in risk profile of the organization and identify the best sources of capital that are willing to make capital available at that stage at an affordable price.

    Capital strategies should recognize that different investors may realize benefits from investing beyond the price charged for the capital.  The success of an organization may yield benefits in terms of access to products or services (customers), new business opportunities (vendors, suppliers, distributors and retailers), local economic impact (economic development agencies and neighborhood businesses) or addressing social problems (impact or social causes).  Because these investors stand to realize additional gains from the success of the organization, they may provide capital at a lower price than institutional investors (banks, angel investors and venture capitalists) who benefit only from the return on their investments.  Access to this community/alternative capital may be easier to gain as well as lower priced.

    Capital planning should also incorporate the possibility that capital may take the form of people, buildings, information/knowledge and equipment that can be invested directly (in-kind) without first having to raise money in order to buy these assets.

    This technique and other tips on successfully conducting an investment crowdfunding campaign will be presented at a workshop on Customer Crowdfunding presented by the Colorado Capital Congress PBC on Thursday, June 23.  More information and to register, go to: http://www.coloradocapitalcongress.com/events

    Additional blogs on crowdfunding can be found at http://www.coloradocapitalcongress.com or on LinkedIn posts by Karl Dakin at http://www.linkedin.com/in/karldakin

    Karl Dakin, President

    Colorado Capital Congress PBC

    karl@coloradocapitalcongress.com


  • 16 Jun 2016 10:05 PM | Anonymous

    Success in crowdfunding is dependent upon having a crowd – a group of people who are willing to invest in your organization and will do so when presented with the opportunity.

    Start building your crowd with people you know and work through them to reach people you don’t know.  With proper incentives and tools, the people you know will make a personal endorsement – the single most important factor when seeking anyone to buy anything.

    An organization commonly has a core of people that participate in its launch:

    • Founders
    • Board of Directors or Managers
    • Board of Advisors
    • Key Service Providers

    Not only do you get the advice of these people, but you also get their contacts: their social assets.

    Each of these individuals has their own personal and business networks.  Each network is large.  In 2014, the average Facebook user had 350 friends, the average Twitter user has 208 followers and the largest group of LinkedIn users has between 181-200 connections.

    So, do the math.  If you are a founder of an organization with no directors or advisors or service providers, you should have between 181 to 350+ people that you can tell about your capital raise.  If you have one director, one advisor and one service provider, the total people within all networks climbs four fold to 724 to 1400+ people that  can be told about your capital raise. If you have a founders’ team of five people with five directors, ten advisors and ten service providers, the number of people that can be contacted will climb over 10,500.  This number may be large enough to successfully complete your crowdfunding campaign.

    If only one in ten people invest and the average investment is $500, then you can raise $500,000.

    This is your core crowd.  Everyone can be contacted by someone they know that knows you.

    There is a tendency of startup founders to move rapidly to market without assembling their core and enabling them to help.  They fail to leverage the power of a crowd.

    Everyone in the core group has an incentive to help.  If it isn’t obvious, then everyone should be made aware by the simple act of explaining the incentive, whether that takes the form of fees, commissions, or equity ownership.

    And, everyone needs to be provided the tools to tell everyone else.  This takes the form of prepared digital messages that can be easily communicated by email, Twitter posts, Facebook shares or LinkedIn notices or by physical messages in the form of cards, flyers, or other printed materials.  The professional crafting and production of these communications assures that the story will be told and retold accurately as it is passed from person to person.  Where possible, these messages can include photos or be linked to videos to create even more impact.

    This strategy is critical for investment crowdfunding, but should be part of any organizations marketing and sales efforts.

    This technique and other tips on successfully conducting an investment crowdfunding campaign will be presented at a workshop on Customer Crowdfunding presented by the Colorado Capital Congress PBC on Thursday, June 23.  More information and to register, go to: http://www.coloradocapitalcongress.com/events

    Additional blogs on crowdfunding can be found at http://www.coloradocapitalcongress.com or on LinkedIn posts by Karl Dakin at http://www.linkedin.com/in/karldakin

    Karl Dakin, President

    Colorado Capital Congress PBC

    karl@coloradocapitalcongress.com


  • 24 Apr 2016 4:56 PM | Anonymous

    When the new crowdfunding laws removed the limited on the number of non-accredited investors, crowd funders tended to fall into two camps:

    1. Capital campaigns focused on a small group of investors – typically 506c accredited investor only large dollar offerings
    2. Capital campaigns focused on a large group of investors – typically intrastate non-accredited investor small dollar offerings

    Each camp has its advantages and disadvantages.  The disadvantages may still prevent a small business from obtaining needed capital.  This is particularly true for small businesses who cannot promise a high growth / high margin future where accredited investors have a clear ‘cash exit’.  It is also true for startup businesses that have yet to build their own crowd of non-accredited investors.

    There is a third choice or middle ground or ‘Momma Bear’ alternative.  This style of investment crowdfunding seeks a mix of accredited and non-accredited investors.  It differs from a classical Reg D private offering (now a 506b offering) which allows up to a maximum of 35 non-accredited investors and an unlimited number of accredited investors.

    Many small businesses do not need large amounts of funding - $50,000 to $250,000.  In the past, with the restrictions on publication of the capital raise, a small business would often find it difficult to find enough accredited investors to make its funding goal.  The small business could turn to the non-accredited investors that it knew, but would come up against the limit of 35 non-accredited investors.

    To some extent, these constraints have been removed.  A small business may raise small dollars without worry of exceeding the limit on the number non-accredited investors. In addition, the small business may also publicize the capital campaign to attract both accredited and non-accredited investors.

    In Colorado, it is possible to conduct an investment crowdfunding campaign under an older statute, CRS 11-51-304(6)-(7).  This is called a Limited Offering.  The small business must file a disclosure document (Form RF) with the Colorado Division of Securities and obtain an authorization.  Within a Limited Offering, an intermediary is not required and the requirement of an escrow agent is discretionary.  This allows a small business to manage its own crowdfunding campaign in full do-it-yourself (DIY) style.

    Other states have similar laws that authorize direct to public offerings (DPO’s) where small businesses can publicly promote an offering to residents of the state in which the small business is headquartered.

    The middle road to crowdfunding must be structured to attract both large dollar and small dollar investors.  Each represents a different market.  The large dollar investors typically seek a high return on investment out of discretionary or saved money.  The small dollar investors typically seek an immediate reward out of available cash. However, the inherent flexibility of investment crowdfunding enables use of different investment packages within a single campaign.  It is possible to offer different mixes of ROI and rewards to attract both types of investors.

    By pursuing both large and small investors, it is possible to keep down the total number of investors and thereby reduce the costs and complexity of conducting a crowdfunding campaign.  Off the shelf software, such as customer relationship management (CRM), can provide some degree of automation.  All other activities, whether they be verification of residency or handling investment transactions can be handled with existing or temporary staffing.

    These issues, options and related information on investment crowdfunding will be presented by Karl Dakin at the following upcoming events:


  • 12 Apr 2016 10:20 AM | Anonymous

    In advocating for investment crowdfunding, I have reached out to everyone and anyone who is involved in entrepreneurship and economic development. I have heard many statements representative of prejudice and bias that exists within the capital industry towards crowdfunding.

    These statements include:

    “I look at it as stealing from the blind so I can't support it!!” 

    “No one with any business sense at all is going to invest this way.”  

    “You are essentially stealing money from idiots.”

    And from a leader of a business startup accelerator: “No company that I am involved with will ever raise money this way.”

    Ironically, those with access to capital seem to be blind to those without capital.  They hear the label of ‘non-accredited investor’ and automatically associate it with a person who not only is too stupid to understand the merits of an investment, but is also so greedy that they will be easily cheated out of their money.

    I consider these statements a form of tyranny working against efforts to democratize the capital industry.  This continues to demonstrate itself in a variety of comments about non-accredited investors:

    • ·         “not sophisticated”
    • ·         “potential victims of fraud”
    • ·         “too small” or “doesn’t matter” or “not important”
    • ·         “Survival of the fittest”

    However, what seems to go unnoticed is that 97% of Americans are “non-accredited investors” – many, many, many of them are savvy successful business people. In fact, probably most of the businesses we shop in, including our favorite local businesses are run by someone in the category of the 97% “non-accredited” investors or was started by someone who was in this category. 

    At one program I presented where I stated that the capital industry must meet the capital needs of the average business, I was accused by an individual of seeking investment for businesses “that are going to fail”.  This person apparently believed that any business that could not achieve high growth with large payouts was not a success.

    I sat in on a crowdfunding seminar recently where the speaker repeatedly belittled state crowdfunding and the new Title III crowdfunding as “only able to raise up to one to two million dollars”.  This description begs the question of how do businesses get big enough that they have a need to raise larger amounts of money.  Surely, not all business can start large.  Those that start small need smaller amounts of funding.

    It is understandable that not all individuals or brokers or investment advisors may want to engage in small dollar investments.  They are free to focus on providing services to the wealthy and earn larger fees and commissions for their efforts.

    But, does this explain attacks on crowdfunding as an opportunity for large scale fraud and theft?  Are the sources of these attacks truly looking out for the interests of the small dollar investor or are they engaging in class warfare.  Are these attacks a form of snobbery? Are only the wealthy entitled to invest?  Are only ‘gazelles’ and ‘unicorns’ entitled to investment?

    These subtle and outright attacks on investment crowdfunding portend the disruptive impact that will be experienced within the capital industry.  Change is occurring.  Some people will oppose change because it harms them financially.  Some will oppose change because they prefer the status quo.  Others will oppose change if they fear that it will diminish their social status.  However, the clear and apparent benefits of crowdfunding ill overcome this resistance.  More money to startup and small businesses will advance innovation and create a stronger economy.

    These issues and related information on investment crowdfunding will be presented by Karl Dakin  along with other experts on community capital on Wednesday and Thursday, April 27th and 28th, at the ComCap16 conference by Hatch Innovation in Portland, Oregon https://www.eventbrite.com/e/comcap16-tickets-18855167313?discount=COLORADO


  • 28 Mar 2016 8:03 AM | Anonymous

    The title to this article is taken in part from the 1956 film Around the World in 80 Days based upon the book by Jules Verne and partly from investment crowdfunding templates that I have developed to set schedules for crowdfunding campaigns in Colorado (we have two laws that enable crowdfunding – one with a $2 million limit and one with a $5 million limit).

    If you haven’t read the book, Around the World in 80 Days, is a fictional story of an Englishman who bets the members of his club that he can circle the globe in 80 days.  The story is set in 1872 when such a feat was considered impossible.

    Each undertaking, both circumnavigation of the planet and the conduct of a crowdfunding campaign, represents a series of events that must be completed on time in order to achieve the goal by the deadline.  Each has a set of challenges that may result in adventure or misadventure.

    The actual making of the film is representative of many business startups.  It was related by David Niven, the star of the film, that Michael Todd borrowed money heavily in making his first movie.  “The post-production work on the film was an exercise in holding off Todd's creditors long enough to produce a saleable movie, and the footage was worked upon under the supervision of Todd's creditors and returned to a secure vault each night, as if it were in escrow.    https://en.wikipedia.org/wiki/Around_the_World_in_80_Days_(1956_film)

    A rough time table for an investment crowdfunding campaign is as follows:

    1.      Crowd building and development of campaign plan [30 days]
    2.      Crowd  building and implementation of campaign plan [30 days]
    3.      Crowd building and receipt of regulatory approval [30 days]
    4.      Crowd building and raising capital (hit minimum goal in 30 days) [30 days]
    5.      Crowd building and raising capital (hit campaign goal in 90 days) [60 days]

    A schedule of 180 days to raise money seems like forever to an entrepreneur who needs the money to start and grow a business.  However, as described by the schedule, half of the time is spent in planning and preparation.  The entire time is spent in selling – creating new relationships that will become customers and investors.  It represents an investment of time that is rewarded with cash and sales.

    The time can be shorter for organizations who have already completed planning and who are already in business selling to customers.  In particular, organizations who have just failed in their efforts to raise money from angel investors may quickly adapt their offering documents to fit investment crowdfunding.

    The time may be longer for organizations who do not have a crowd – a group of people with whom the organization has a relationship that enables asking for money.  Customers alone do not make a crowd if the organization does not know them and does not have their contact information.  Followers on social media also do not make up a crowd, although it represents a good start.  The number of people in a crowd is the single most important factor in how long a campaign will need to run until it can be successfully completed.  Use of press media, social media postings and advertisements will not work as well as a large number of existing relationships with happy customers.

    When the movie was made in 1956, travel around the world could be accomplished in two days.  So, the concept of circling the world in 80 days was no longer a challenge.  Today, raising $5 million in 180 days is a formidable task.  As we learn more and systems are optimized for investment crowdfunding, it will become possible to raise money in a shorter period of time.  Although it may never be possible in two days, it may become possible to raise $5 million in 80 days.  A title for a new movie?

    These issues and related information on investment crowdfunding will be presented by Karl Dakin at the following upcoming events:


  • 20 Mar 2016 2:24 PM | Anonymous

    Raising capital through investment crowdfunding is different from the common approach to raising capital. 

    Best practices in investment crowdfunding should result in a capital campaign with multiple offering packages for different crowds.  Each crowd receives an offer package comprised of benefits and return on investment (ROI) that fits only that crowd.  The capital campaign takes on a complex, layered depth and richness.   

    There is not one crowd!  There are millions of crowds representing different combinations of billions of people!  Each offering package is designed to fit a specific group of people with similar needs and goals! 

    Investment crowdfunding campaigns that treat all investors alike will fail just like common approaches to raising capital. “The myth that crowdfunding is a magic bean that instantly draws thousands of strangers’ dollars to your idea - just by publishing it - is entirely false.”  https://www.fundable.com/crowdfunding-marketing

    By contrast with common capital raising approaches, investment crowdfunding is a multi-colored spectrum instead of a monochromatic black and white.

    Why the difference?

    When using common approaches to raising capital, the only decision variable is the return on the investment.  “It’s all about the money.”  A single dimension.  A single perspective. 

    It may be argued that there are all kinds of variables within an investment decision: risk, the experience of the management team, customers, the market and competition.  However, all of these factors are simply used in forecasting a return on investment.

    Although any organization sees itself as a unique combination of people, products and customers, from the perspective of an investor, only the outcome is measured:  return on investment. 

    When considering a multitude of investment opportunities, it becomes difficult to tell one opportunity from another.  Metaphorically, an investor finds himself or herself sitting on a large pile of coal, each lump representing a different opportunity, trying to find the ‘best’ one.  “Looking for a diamond in the rough.”  

    Knowing that investors have a single focus on ROI, organizations develop all of their offering documents, slide decks and pitches to tell the same story: “my opportunity will result in a higher ROI”.  Organizations seeking capital hope that their story will somehow resonate with the investor and gain them the capital they seek.  But how can organizations differentiate themselves when their story has only one dimension?  How can a story be different when it is designed to fit the needs of all investors: generating a higher return on investment?

    An investment crowdfunding campaign offering that meets the needs of a specific investor has to offer value beyond a return on investment.  It must meet other needs: financial, economic, social, spiritual, status and privilege.  The focus of an offering shifts from the need of an organization for money to the needs of the individual investor for deployment of their money as a reflection of self and in advancement of their personal goals.

    A single crowdfunding campaign will not meet the needs of all investors.  It may be of great value to some investors and of little to no value to other investors.  Capital campaigns can be targeted to those who benefit most.  Marketing becomes the guideline for matching organizations with investors.  Raising capital can become an art form instead of a gamble.

    Helping crowds, comprised of individual people, attain their goals by investing capital can become fun.

    These issues and related information on investment crowdfunding will be presented by Karl Dakin at the following upcoming events:


  • 13 Mar 2016 1:15 PM | Anonymous

    The term ‘smart money’ refers to individuals with experience and knowledge in making investments that are most often employed by a business that manages money on behalf of its clients.  Too often it is used to describe anyone with money without regard to their understanding of investments, economics, business management or markets. 

    As described in a recent article Hopes Role in Equity Crowdfunding by Paul Neiderer in CrowdFundBeat.com, it is not uncommon for an angel investor to have no criteria except to make ten times the amount of their investment within five years.   Will this approach to investment selection work in investment crowdfunding?  More specifically, will this approach work when raising money from non-accredited investors?  The article discusses ‘hope’ as a framework for investing.

    Too many commentators on investment crowdfunding continue to label non-accredited investors as unsophisticated individuals who are incapable of recognizing a good business opportunity or avoiding a scam.  This is ironic considering that the vast majority of angel investors have no experience or training in making investments.  Due diligence interviews often serve no purpose except to display the egos’ of the interviewers.  Investments by accredited investors are often no better than a blind guess.

    Is it possible that non-accredited investors will do better than accredited investors in making crowdfunding investments?

    It seems likely that non-accredited investors will use different investment criteria.  The money they invest is not discretionary income.  They will feel a loss much more painfully than someone who will not give up their house, car, vacation or other item of value if the investment goes wrong.  They will make their investments more carefully.

    An individual making a small dollar investment – less than $1,000 – cannot expect to get rich off of their investment.

    In fact, non-accredited investors will rarely get the opportunity to invest in a ‘unicorn’ or any of the very, very few businesses that can actually achieve a 10x return in five years.  These opportunities will be grabbed up by institutions that can bear the cost and time of continuously searching for that opportunity.  Almost every investment opportunity offered up in investment crowdfunding will be a local business that grows slowly, that is built to hold instead of to flip and that will never be on the cover of a national entrepreneur magazine.  An average business.

    Since these businesses cannot attract investors through promises of fast growth and huge profits margins, it will be necessary for them to offer something else of value to friends, family, customers, other businesses and community members.   This value may take many forms:

    • Local availability to products and services
    • Discounts resulting in personal savings
    • Enhancements in status
    • Privileges
    • Jobs
    • Secondary business opportunities
    • Support of community programs and charities
    • Payment of taxes that pay for schools, roads and safety
    • Solving specific problems of the community – social impact

    The non-accredited investor may place greater weight on other criteria:

    • Personal relationship
    • Honesty
    • Tradition
    • Clarity
    • Transparency
    • Spirituality

    Using criteria other than a return on investment, non-accredited investors may legitimately and confidently place their money in the hands of local businesses and investment crowdfunding should flourish.  

    These issues and related information on investment crowdfunding will be presented by Karl Dakin at a number of upcoming events:


  • 07 Mar 2016 9:05 AM | Anonymous

    What if an organization cannot raise all the money it needs from friends and family or from large dollar investors (venture capitalists, angel investors, foundations or strategic partners who can commit $10,000 or more to a single investment)?  Many capital campaigns fail to hit their goals.  This failure is usually not total, because the organization is able to raise some of the money it needs before hitting the wall.  However, raising only part of the needed money may be worse than raising no money at all.  The organization may have launched operations in expectation that more investment dollars would follow.  It then finds itself trapped in a strategy that will not work. A common story.

     There are many reasons why an investor will not invest or will only make a small dollar investment:

    • The investor doesn’t have all of the money needed by the organization
    • The investor has no prior relationship with the organization or its management that makes it comfortable in making a large dollar investment
    • The investor has not heard of the organization or its efforts to raise capital
    • The investor may have little or no prior experience in making an investment

     Every capital campaign should have a fallback strategy – a course of action to take when the organization is unable to implement its primary or preferred strategy.  A fallback strategy may be to get by with less money and bootstrap the organization through sales.  A fallback strategy may be to shift the focus of the capital campaign to a different investor group or class.  Or, it may be simply to lower expectations.

     A new fallback strategy is to conduct an investment crowdfunding campaign.

     Investment crowdfunding represents the newest and possibly the best way for your organization to raise money.  It fills the major gap between bank financing and angel investing within the capital industry.  New laws now enable raising capital where you can publicize your capital campaign and accept investments from everyone.

     For total costs of an investment crowdfunding campaign that may be less than $50,000, a business, social enterprise or community project may be able to raise between $1 million to $50 million from non-accredited investors.  These investors may be stakeholders who stand to benefit from the success of an organization and have additional reasons to invest in an organization beyond a simple return on investment.

     A large dollar investor may loan an organization the money needed to plan, manage and promote an investment crowdfunding campaign.  With money raised from a successful campaign, this loan may be repaid with interest – a simple, short term investment.  In effect, an organization may leverage a smaller investment to complete its capital strategy with small dollar investors and obtain the money it needs.

     A successful crowdfunding campaign may also support an organization in building its brand and growing sales – accelerating the ability of the organization in fulfilling its mission and attaining profitability.  It will also make the organization visible to more large dollar investors.

     The large dollar investor may treat the conduct of an investment crowdfunding campaign as a test of whether or not the organization can be trusted with larger investments.  A customer focused investment crowdfunding campaign will serve to demonstrate the need for the products and services of the organization.  It will demonstrate the extent to which customers will support and be loyal to the organization.  The conduct of an investment crowdfunding campaign will also demonstrate the management skills of the organization’s leadership.

     If an organization is unable to obtain the large dollar investment it seeks from a particular investor, it may want to suggest that the investor first finance an investment crowdfunding campaign – a fallback with many advantages.  After completing the campaign, then the organization is well positioned to seek even more money.

     This strategy and related information on investment crowdfunding will be presented by Karl Dakin at a number of upcoming events:




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