September 26th, 2018
Crowdfunding? 7 steps to help you prepare for a successful U.S. campaign
Special to Financial Post | December 3, 2014
Small businesses in Canada can be forgiven for not knowing about Rule 506(c) of the U.S. Securities Act, which allows for the sale of private company shares online (also known as equity crowdfunding). The act opens doors for both Canadian and U.S. companies to tap into a vast sea of money to take their operations to a new level.
Now with equity crowdfunding set to have an impact on financing that is as deep and wide as e-commerce and social media had on sales and marketing, it is easy for companies to turn Internet followers and customers into shareholders.
My company, WAFU Inc., recently became the first to launch a simultaneous cross-border (U.S./Canada) Rule 506(c) / Reg. S accredited investor equity crowdfunding offering through CircleUp in the United States and Optimize Capital Markets in Canada.
Based on our experience, and a belief many Canadian companies are likely to attract serious interest from U.S. investors, here is a seven-point checklist on how to conduct a Rule 506(c) equity crowdfunding offering in the United States:
Prepare your company First, hire an outside accounting firm and prepare financial statements for the past few years of operations. Then hire a securities lawyer to draft a proper shareholders agreement, which will contemplate how to operate the company after the offering, and what rights new shareholders will have in the company. The attorney should also assist in preparing some form of offering document, as well as a subscription agreement through which investors will purchase their shares. If you expect to gain many new shareholders, you should consider engaging the services of a company such as KoreConX to help manage investor communications, and information sharing post-offering, as well as a transfer agent to handle the shareholder registry in book-entry form rather than having the company issue and manage physical share certificates.
Prepare to publicize Take a good look at all the company’s media properties: website, blog, Facebook, Twitter, LinkedIn, Instagram to determine how to use them to promote the securities offering. We continued to use our blog, Facebook, and Instagram pages exclusively for the WAFU brand, and to only use Twitter and LinkedIn for the offering. On our website we added an "Invest in WAFU" link to connect to the equity crowdfunding sites managing our offering in the U.S. and Canada.
We also retained the services of a financial public relations firm to help draft and distribute our press releases and conceive and execute a PR strategy for the duration of the equity crowdfunding round. You should also consider engaging in paid Twitter and LinkedIn campaigns to magnify the reach of your posts on these platforms.
Related: WAFU Inc. Launches First Ever Simultaneous Cross-Border Equity Crowdfunding offering in Canada and the United States
List on a reputable equity crowdfunding site It should have a proven track-record of successfully raising money. In the United States, we chose CircleUp, the premier accredited investor equity crowdfunding portal for consumer packaged goods in that country. CircleUp has helped companies raise more than $40 million from accredited investors and has a growing list of big name companies, including Virgin America, Johnson & Johnson and Proctor Gamble, that invest in companies on its platform. To comply with Rule 506(c), you will also need to get a representation from the crowdfunding portal and certify internally that none of yours or the site’s executives, officers, directors, partners or shareholders are “bad actors.”
Produce a kick-ass video This is probably the most important part of any crowdfunding campaign. Your video has to be really good. For WAFU’s crowdfunding video, we engaged the services of one our designers in London, who also had experience in film and advertising.
Line up some of your current shareholders to participate To make your online equity crowdfunding offering a success, you must show you are continuously raising money from the crowd and progressing toward your fundraising goal. It helps to line up existing shareholders to participate in the offering during the first few weeks of the offering. The best way to do this is to offer existing shareholders a special deal.
Gil Michel-Garcia is co-founder and chief executive of WAFU Inc., a Montreal-based company that develops, produces and distributes a line of Japanese dressings and mayos. He has more than 15 years of global corporate legal and business experience, as a corporate securities lawyer at leading international law firms in Montreal, New York and London. He is also a Crowdfunding Ambassador at the National Crowdfunding Association of Canada.
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Learn more About Us | Support Canadian Crowdfunding.