Crowdfunding Pioneers Sherwood Neiss & Jason Best reported recently on VentureBeat.com about on early successes for crowdfunding companies. This update is based on interviews and surveys with 87 companies utilizing rewards, debt, and equity crowdfunding are exciting: sales are up, and investment is growing.
Increase in Sales
Company executives at companies who have concluded successful rewards, equity, or debt campaigns reported that quarterly revenues grew by an average of 24% post crowdfunding, and that doesn’t include revenues raised by crowdfunding. Equity-based campaigns were the outlier, coming in at 351% quarterly revenue increase.
Neiss & Best, of Crowdfund Capital Advisors, report that “the funders see themselves as “active investors” rather than passive investors in large, pubic companies and want to be “loyal to the brand” and “act as an extended sales force” with a “vested interest in the success” of their investment.”
Crowdfunding revenues were spent within 90 days of the end of a campaign, primarily on hiring people to help the company accomplish the goals of the crowdfunding campaign.
39% of companies hired an average of 2.2 new employees per company post crowdfunding; and an additional 48% of companies said they intended to use crowdfunding proceeds to hire new staff.
Despite some perception that VCs and Angel investors would steer clear of a company with a large number of unsophisticated investors, the contrary is proving to be true as crowdfunding companies use this new tool to create deal flow.
The survey indicated that within 3 months of a crowdfunding campaign nearly three-quarters of companies had secured institutional investors or were in conversation with them. 28% of companies had secured an angel investor or venture capital round; and another 43% were in discussions with institutional investors.
The crowd provided social proof for the company thereby lowering the risk of follow on investment. “Investors (be it crowdfunders, private money, or public markets) want to invest in companies that have a great story, a great product, a great business model, and a great team — all characteristics that successful crowdfunding campaigns seemed to demonstrate” report Neiss and Best.
More Than Money
While investment was the main goal of crowdfunding companies surveyed, additional benefits were accrued. Some of the benefits enumerated include early feedback on products, marketing advice, and investor expertise.
About Crowdfund Capital Advisors:
Sherwood Neiss (@woodien) and Jason Best (@CrowdCapAdvisor) helped lead the U.S. fight to legalize debt and equity based crowdfunding, and co-founded Crowdfund Capital Advisors, where they provide advisory and implementation services to investors, governments, multi-laterals, and entrepreneurs seeking to create effective strategies in this new form of early-stage finance. They co-authored Crowdfund Investing for Dummies, as well as the World Bank report Crowdfunding’s Potential for the Developing World. They are also both Entrepreneurs-In-Residence at the UC Berkeley Center for Entrepreneurship and Technology.