Equity Funding Blog

Checklist for Equity Crowdfunding

Fundraising Checklist-610px

Business must be past the idea stage

The company is legally formed – in this instance we’ll use 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.)

A team is in place

  • Determine basic functions of company
  • Assign people to handle those functions

You have an MVP or service

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 you do:

  • Know your business objectives (where you’re going)
  • Determine if you 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 yours

  • Look for both successful and unsuccessful examples
  • Find elements that can suit your campaign

How much to spend with platform

  • Determine the level of service you want 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.)

Execute crowdfunding campaign