Equity Crowdfunding is the Ultimate Customer Loyalty Program

Alex Tynion from SeedInvest and I sat down recently to talk through some of the things that we’ve learned from helping the first few companies who have “tested the waters” under the new Reg A equity crowdfunding rules. Regulation A is an equity crowdfunding rule that allows private companies to raise money from the general public. So far, we have helped three companies on SeedInvest to reach over $10M in indicated interest from over 2,000 people each.

There are some common mindsets and practices that we’ve seen across the companies that have been most successful with equity crowdfunding.

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The Moral Hazard Created by Abundant Startup Funds

I vehemently disagree with a lot of this article, but it’s so well written that I just had to share it. Murad Ahmed from the Financial Times neatly captures the changes that are happening in the London startup scene and the increase in angel investing and venture capital in Europe.

For 4 years I lived through the heyday of this boom in UK startup funding. But my experience was that to go along with the increase in investors, there has been a corresponding increase in startups so that the two have balanced each other out. The good startups that get funded by good investors are still dedicated, hardworking and humble.

I’ve reproduced the article from the Financial Times site below because the article is so important as a record of a certain time in London’s startup scene and it would be a shame to lose it. You can see the original article, if it’s still visible on the FT site.

Enter FT journalist Murad Ahmed…

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Lean Copywriting

The Lean Branding process consists of strategy, messaging and design. Of these three, messaging and copywriting is often the hardest to apply lean principles to. Language can be very subjective, so judging how best to create copy in a fast-paced environment is not easy. There are a few lessons I’ve learned from creating copy to help express a refreshed brand position.

Copy and messaging is where your brand comes to life in the written word. People are visual creatures, but language is still one of the most powerful ways to communicate and persuade. In almost every industry copy and messaging is a vital part of bringing the brand to life.

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Traction: A startup guide to getting customers

One of my favorite marketing books to refer to for ideas is Traction: A startup guide to getting customers by Gabriel Weinberg and Justin Mares. Their first edition was also available as an audiobook on Audible. They are now in the process of publishing a 2015 second edition so I thought I’d take a moment to share some of my favorite parts of the book. Continue reading Traction: A startup guide to getting customers

Bringing Venture Capital online at SeedInvest

I recently joined the SeedInvest team in New York. SeedInvest is a leading equity crowdfunding platform that is streamlining the startup investing process so that new types of investors can invest directly in early stage companies. I’m responsible for digital marketing and helping startups promote their campaigns to investors. It’s been a big couple of months for me, so I thought I’d take a moment to update you on what I’ve been up to.

1. I’ve moved to New York

New York has always been a centre of financial innovation and the earliest venture capital investors almost all started out in New York before moving to Silicon Valley. I’ve always wanted to live in New York. In late 2014 I won the green card lottery and we have now relocated permanently to the USA. So far, we’ve been using AirBnB to experiment with different neighbourhoods and have fallen in love with Tribeca, Nolita and Brooklyn Heights.

New York has a great environment to build a startup. The city is alive 24 hours a day and there is a great mix of design, business and technical skills. I love the intense energy and the mix of cultures from all over the world.

2. I’m still working with startups

As soon as I knew that we were moving to the states, I started researching the emerging American equity crowdfunding platforms. I’ve long believed that democratising the financing of small businesses will be one of the greatest shifts in the structure of capitalism since the advent of the public stock markets. Allowing new entrepreneurs and new investors to find each other will create new companies, new jobs and new opportunities. I loved being part of investment platform Seedrs in the UK and with recent changes in US securities laws, the timing was perfect to transfer these skills to the USA.

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Using business design to innovate

Business design is a new way of thinking about companies as interconnected systems worthy of innovation, creativity and the application of design to the systems themselves. Business design applies the mindsets of a designer to the task of creating the overall strategy and business model.

Brand Personality
Business design looks at the financial model of the company as an area for innovation.

Business design is a useful way of looking creatively at a company in the context of its customers, suppliers and competitors. Every company needs to combine the disciplines of technology, design and business together to deliver value for a customer. But too often, only the crafts of technology and design are seen as real sources of new innovation (with the business function itself just doing the marketing or arranging the finances). In reality, the business-side of innovation can be incredibly important.

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How to value a startup investment

Company valuation is one of the most misunderstood parts of early stage investing. Both investors and entrepreneurs get themselves endlessly tied in knots trying to calculate a startup’s “value” despite the fact that the whole concept of valuation is entirely artificial. How to value a startup is one of the most common questions I get when I present to entrepreneurs on the topic of venture capital and online angel investing. What worries me the most is that talking about valuation in isolation can distract people from the real issues of economics (amount of cash invested) and control (percentage equity offered).

Social media for executive profiling
The value of a startup is determined by the willingness of the entrepreneur and the investor to agree on a price that works for both parties.

One of the most common questions that you hear entrepreneurs and VCs ask each other is “What’s your valuation”? It seems like a sensible question and it’s a tempting way to compare different companies who are raising capital, but the idea of a single number as an agreed valuation for a startup is a dangerous distraction from the real issues. The term “valuation” is simply a useful shorthand to talk about several independent variables. These variables can be quickly forgotten when you start a conversation with the issue of valuation.

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Dave McClure on equity crowdfunding

Brant Cooper and Patrick Vlaskovits interviewed VC investor Dave McClure as part of their book the Lean Entrepreneur. The Lean Entrepreneur was published in 2013 and I picked up a copy after seeing Patrick Vlaskovits speak at the Innovation Warehouse in London.

Patrick has a really practical and grounded approach to innovation, growth hacking and the world of startups. He’s been an inspiration to me and has contributed a lot back to the community through mentoring and coaching various startups.

After reading the book last year, I got a copy of the audiobook on Audible. Some of the checklists and bullet-points don’t survive the transition to audio that well, but overall the audiobook was excellent and I recommend it alongside the Lean Startup as one of the key audiobooks for entrepreneurs and investors.

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Mark Suster and Clayton Christensen on equity crowdfunding

In 2013 Mark Suster a leading VC investor and Clayton Christensen a leading business author sat down at Startup Grind to talk about disruptive innovation and startup investment. Their conversation touched briefly on the subject of equity crowdfunding. Both Mark and Clayton are extremely cynical about equity crowdfunding. Some of their concerns are sensible questions about an emerging industry. But what they were secretly doing was arguing for the old model. I’m a big fan of Mark’s blog and Clayton’s books but they’re wrong about the disruptive potential of equity crowdfunding.

VC investor Mark Suster and business author Clayton Chistensen at Startup Grind.
VC investor Mark Suster and business author Clayton Chistensen at Startup Grind.

By betting against against equity crowdfunding, Mark Suster is betting against the internet. I believe the internet will do the same thing to early stage finance that it does to all industries. Namely, make them more competitive, connected and democratic.

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