With the addition of Title III to the Jumpstart Our Business Startups Act (JOBS Act) in 2016, all titles of the JOBS Act providing for crowdfunding (Title II, Title III, and Title IV) have now been adopted. This allows businesses the ability to receive investment capital from crowdfunded sources. The advent of all this crowdfunding legislation gives businesses the opportunity to access a wider range of investors and raise extra capital to grow their businesses. The new influx of potential investors, though, may require some changes to traditional business strategy.
Expanding the Campaign
When beginning your investment campaign, businesses should look to their immediate network for initial investments. In addition to gaining investments from trusted clients, these investors will spread information about your campaign to their contacts, increasing your potential pool of investors. It gives you a solid funding base and ultimately expands your campaign beyond that initial network. People within your social network have connections to other investors who may be interested in your product or campaign; their investment and interest could lead to even more investors or even long-term business relationships.
Once those networks have formed, you will be able to redirect your campaign towards larger investment groups. If you have a solid base of funding before turning to these investors, they recognize your campaign as a legitimate business effort worth the potential investment. It’s important to understand that the success of a crowdfunding campaign is often determined before it is launched. Spend a lot of time preparing for the launch of your campaign so that it begins with a bang. Investors are more likely to participate in a crowdfunded campaign if it seems as if other investors are interested in it.
Crowdfunding Key Factors
Successful crowdfunding relies on two vital factors: target demographics and reliable investors. Knowing your targeted demographic allows you to determine early potential investment amounts and adjust your campaign and plan accordingly. Having a solid crowdfunding plan makes the targeting process easier. Focus your efforts on your target demographics, but find ways to expand the available pool of interested investors.
Most crowdfunding requires reasonable inquiry into the accredited investor status of investors, but Title III crowdfunding does not. The benefit of being able to accept funds from any type of investor is appeal, but accredited investors are likely to continue funding most investments.