Thank you to everyone who joined us for Investment Crowdfunding 101, a virtual session with Annamarie Galante and Jackie Logan of Honeycomb Credit.
Crowdfunding is the use of small amounts of capital from a large number of individuals to finance new business ventures. Investment crowdfunding falls under the regulatory framework of the U.S. JOBS Act. Regulation crowdfunding is not right for every business, but it is an opportunity for small businesses to raise capital. Today’s session was intended to help owners of small, independently-owned Rhode Island businesses understand whether investment crowdfunding might be right for them.
Annamarie shared the three main types of crowdfunding:
- Donation – The funder gives a donation and does not expect anything in return. Donation crowdfunding campaigns are most appropriate for catastrophic disasters or issues/causes.
- Rewards – In exchange for their donation, the funder receives the promise of some kind of reward. Rewards-based crowdfunding is a good fit for product companies, creative projects, or pre-orders.
- Investment – Investors will either hold equity or expect a return on investment through a debt note, which requires a plan for repayment or successful exit. This works well for larger capital raises and for building advocates for the business.
Crowdfunding can be structured as debt, revenue share, convertible notes, or equity. Different structures make sense for different types of needs and campaigns.
Among the tips Annamarie offered:
- When you’re raising capital, you’re simultaneously running a marketing campaign. Investors can become advocates and repeat customers. They will feel like owners in your success! That means you need to invest time in making it successful.
- Be as specific as possible in your raise; investors like to understand what they are being asked to fund.
- As you’re considering outreach strategies, think creatively. Don’t underestimate all the things you have done–in all the areas of your life–to build and engage community.
- Work closely with your crowdfunding advisor to be sure you are selecting a target raise that actually works for your business.
Honeycomb Credit is an approved Regulation CF investment platform that allows local businesses to borrow money from everyday investors. Unlike some of the other approved platforms, Honeycomb focuses on local economies and local small businesses.
Today’s program was co-hosted by the Business Empowerment Alliance of Rhode Island, Hope & Main, the Rhode Island Black Business Alliance, the Rhode Island Hispanic Chamber of Commerce, and Social Enterprise Greenhouse.
