CTRINE VENTURES’ INVESTOR GUIDE — PART 2 of 2
We’re back for Part 2 of our Investor Guide series! If you haven’t read Part 1, go back and check it out here. In Part 1, we reviewed how to secure funding for your startup through Angel Investment, Venture Capital and Government Loans/Grants. We talked about what each investor is looking for in a business investment and reminded all startup founders that when they’re seeking external funding, that they are just that — a business investment — and need to tailor their pitch accordingly.
In Part 2, we will review some of the more complex forms of raising investment capital — Crowd Funding, Cryptocurrency (ICOs) and IPOs. Reminder: This is just a summary. If you want more detail, send us a message or drop a comment below and let us know what you want more of. And as we get more complex, a quick disclaimer — the advice here should not substitute professional advice from investment bankers/advisors. This is just a summary and is meant to give you an idea of what each funding stream is all about. If you’re seriously considering raising external funding make sure you consult your lawyers to accurately assess which funding stream is best for you and your business.
Now that the disclaimers, summaries and reminders are out of the way! It’s time grab your pen and notebook, it’s time to get started.
Crowd Funding
Where does the money come from?
Your fans. Think Go Fund Me or Kickstarter. Crowd funding, although a non-traditional approach in the startup world, is a very real way to raise capital for your business.
Type of person?
Your fans. So you better know them inside and out!
What are investors looking for?
If you decide to leverage crowd funding to secure capital, you will need to offer incentives to your fans — and good ones! Offering a first-to-market trial, free/limited edition product accessories or special pricing incentives are all great ways to encourage people to contribute their cash.
Summary: There are few different things you need to look out for when securing capital through crowd sourcing. The biggest thing being your financing goal. Unlike traditional capital sources, you need to be careful about setting your funding goal because if you don’t reach it you don’t get any of it. It’s also an insider secret that if you don’t secure 2/3s of your capital within the first 48 hours of launching your campaign, you’re unlikely to meet your goal. If you’re able to secure the funding, there is a very good chance that you reach your goal. Once you reach 2/3 of your goal, funding companies will boost your campaign and you’ll get better placement on the main site. Long story short — if you’re going to go with crowd sourcing 1) Make sure you set the right goal and 2) Make sure you hit 2/3 of your funding goal within the first 48 hours. That means, yes, you may need a marketing campaign for your funding campaign. In fact, we suggest you do!
Cryptocurrency ICOs
Confused already? You’re not alone…the cryptocurrency market can be confusing but it’s also a great way to raise a lot of capital — and fast — if you know what you’re doing! We’ll try and make it simple here but if you do plan on raising capital this way, you should do a lot more research. There’s a wealth of information out there on ICOs so we encourage you to get out there and learn more! It’s a very interesting world.
Where does the money come from?
The public — but only those invested in the cryptocurrency market.
Type of people?
Highly risk tolerant investors. These people are actively invested in the volatile cryptocurrency market and therefore have an appetite for certain types of businesses and investments.
What are investors looking for?
High return potential. Typically fast returns too. Having your currency backed by tangible assets like equity or cash are a benefit. There has been a slew of sketchy (there’s no better way of saying it…) ICOs in the past couple of years — some even purely fraudulent — so if you can make an investor feel like they have some sort of security, you could get strong traction and stand out from the other ICOs.
Summary: You need to do a lot more research before considering an ICO funding route. We highly recommend consulting a professional Blockchain/Crypto investing firm or other funding specialist. Keep in mind that traditional investing firms often shy away from crypto investments so if you’re seriously considering this as a funding method, you should talk to someone who is very familiar and invested in the space. We also suggest researching ICOs from the perspective of an investor and a business to ensure you’re successful. Time to get reading!
Here are some links to get started:
IPO
Where does the money come from?
The public through shareholding. You’re playing in the stock market now friends!
Type of people?
Shareholders. The type of person will vary drastically, especially depending on the investment opportunity. If you’re reading this, more than likely you’re an early-stage startup (or interested in early-stage startups) so your investors will have higher risk tolerance. Often stocks/shares are bought by accredited investment firms not individuals.
What are investors looking for?
A well managed, well constructed company. They want a company with predictable patterns and growth, not often a wild card risk.
Summary: Short for Initial Public Offering, an IPO is when a company issues shares of their corporation to be purchased by institutional investors and often retail investors as well. You should consider an IPO if you’re looking to raise capital, monetize the investments of private shareholders (i.e. your ownership equity) or to enable easy trading of existing holdings for future capital raising efforts. Once you issue an IPO, you‘re a publicly traded company which fundamentally changes how your business operates. You now have the responsibility to act in the best interest of your shareholders, not just you and your company. You need to decide if you and your company are ready for that before deciding to file an IPO. On the logistics side, if you’re planning an IPO, you’re probably already working with an investment banking firm but if you’re not, you will need to! There are a lot of legalities with filing for an IPO so you should be working through this with your lawyers and accredited investment banking firm. It’s an expensive endeavour but is also one of the best ways to raise capital.
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Here ends Part 2 of 2 in our Investor Guide series. If you have any questions about securing external funding or any of the topics we discussed, please reach out! We love hearing your stories and helping businesses bring their vision to life.
Good luck on your investment journey!
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CTRINEVENTURES.com || @CTRINEVENTURES || GetStarted@CTRINEVENTURES.com
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CTRINE VENTURES is a full-service marketing and communications company that specializes in providing world-class and affordable marketing support for start-up and scale-up businesses around the world. CxV partners with true innovators and disruptors across all industries. From Tech to Wellness, we work with the most talented, creative and open-minded hustlers who are exceptionally passionate about their industry, their business and making a real impact. We’re currently accepting new clients. Let’s change the world together!
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