This week, crowdfunding platform EquityNet unveiled a new equity crowdfunding checklist that will help businesses find success with their upcoming campaigns.
The following was reported by EquityNet.
The company is legally formed – in this instance; the platform used an LLC as an example:
- Choose a name for your LLC
- Can’t be the same name as another on file with LLC office
- Must end with an LLC designator
- Can’t include certain words prohibited by the state (Bank, Insurance, Corporation, City, etc.)
File Articles of Organization with state’s LLC filing office
- Note Filing Fees, Required Information, and Registered Agent
Create an LLC Operating Agreement
Members’ percentage interests in the business- Members’ rights and responsibilities
- Members’ voting power
- Allocation of profits/losses
- How the LLC will be managed
- Rules for holding meetings and taking votes
- Buy/sell provisions that determine what happens if a member wants to sell his interest, dies, or becomes disabled
Publish a Notice stating intention to form LLC (some states only)
Get licenses and permits needed to operate (business license, Federal EIN, sellers’ permit, zoning permit, etc.). When a team is in place, the company must do the following:
- Determine basic functions of company
- Assign people to handle those functions
When the company has an MVP or service, it must identify customer base:
Prepare financial/legal documents
Consider hiring an outside accountant and lawyer
- The money spent will provide you with objective third-party professional guidance
- Will help prevent future legal problems
Business Plan – Describe the following:
- Business Summary (Executive Summary)
- Business model
- Product/Service
- Any intellectual property
- Markets
- Competition
- Management
- Finances
- Capitalization Strategy
Executive summary
- Purpose/Importance – explain your business in a way that will want people to learn more. It should include enough information so investors can see the potential behind it without having to read the whole plan
Pitch deck
- Purpose/Importance – A presentation to provide potential investors with a brief overview of business plan usually used during face-to-face or online meetings with potential investors, customers, partners, and co-founders.
PPM
Purpose/Importance – A legal document that states the objectives, risks, and terms of an investment involved with a private placement. It provides buyers with information on the offering and protects the sellers from the liability associated with selling unregistered securities.- Difference from Business plan – A business plan is primarily a marketing document created to promote a company and purposely contains forward-looking information. A PPM is a disclosure document that is descriptive but not persuasive and allows the investor to decide on the merits of the investment – it’s more factual and concrete. It can serve as a marketing tool if it is well drafted.
File with State Security Agencies
- Purpose/Importance – There are numerous regulations surrounding a securities offering on both a state and federal level. In order to adhere to this regulation a company must file appropriately with the relevant State Security Agencies. Please consult an attorney in regards to this.
File with the SEC
- Purpose/Importance – There are numerous regulations surrounding a securities offering on both a state and federal level. In order to adhere to this regulation, a company must file appropriately with the relevant State Security Agencies. Please consult an attorney in regards to this.
Get familiar with Solicitation Laws
Prepare Marketing/Brand materials
Consider hiring an outside PR firm – if the company does:
- Know the business objectives (where you’re going)
- Determine if they need access to a larger network than your existing one
Website
- Allows customers and potential investors to quickly learn more about your company
- Helps establish web presence
- Helps establish social proof
Video
- Campaigns that have video are 4x more likely to receive investor attention
- Keep it short (3 minutes max)
Expand social media presence
- Increases brand recognition/authority
- Helps establish web presence
- Helps establish social proof
Testimonials
- Gives investors opportunity to hear what customers think about product
Product/Service demonstration
Elevator pitch – verbal version of executive summary
Determine fundraising goals
Which platform to use
- Mass market v. vertical
- Tools/services provided by platform
- Size of platform
Research past campaigns similar to the company’s
- Look for both successful and unsuccessful examples
- Find elements that can suit their campaign
How much to spend with platform
- Determine the level of service the company wants to receive
What type of capital to go for (equity, debt, etc.)
- Evaluate the merits of various forms of capital
Establish a realistic minimum funding goal
Establish a realistic funding deadline
Determine what funds raised will be used for
Finalize preparations for campaign
- Create a profile on a crowdfunding platform
- Target investors with expressed interests first
- Prepare introductory materials/pitch text
- Upload appropriate documents and marketing materials (business plan, pitch deck, video, etc.)
See the entire checklist below.
