Join us for an eye-opening conversation with our CEO, Rob Burnett, as he shares his expert insights on equity crowdfunding and the secrets to successful fundraising. Discover the power of building and nurturing relationships with potential investors, including friends, family, customers, and advisors. Rob reveals practical strategies for engaging with these groups and creating a sales funnel that leads to fundraising success. Plus, find out how innovative tools like ChatGPT can revolutionize your email drafting and calendar management. Don't miss this invaluable episode packed with actionable advice for your fundraising journey.
In the second half of the show, we shift gears to explore the art of approaching angel investors and venture capitalists. Learn why seeking advice before asking for money is a game-changing approach, and how to leverage email as a more effective communication tool than LinkedIn. Our conversation delves into the importance of building a strong personal web and network to secure investments, along with the resilience needed to handle rejection. We wrap up by discussing the growth and success of equity crowdfunding, highlighting the importance of seeking advice, preparation, and crafting a compelling narrative when seeking investment. Tune in for a wealth of wisdom and inspiration in this must-listen episode.
If you want to raise capital for your business visit us at https://netcapital.com/
Join us for an eye-opening conversation with our CEO, Rob Burnett, as he shares his expert insights on equity crowdfunding and the secrets to successful fundraising. Discover the power of building and nurturing relationships with potential investors, including friends, family, customers, and advisors. Rob reveals practical strategies for engaging with these groups and creating a sales funnel that leads to fundraising success. Plus, find out how innovative tools like ChatGPT can revolutionize your email drafting and calendar management. Don't miss this invaluable episode packed with actionable advice for your fundraising journey.
In the second half of the show, we shift gears to explore the art of approaching angel investors and venture capitalists. Learn why seeking advice before asking for money is a game-changing approach, and how to leverage email as a more effective communication tool than LinkedIn. Our conversation delves into the importance of building a strong personal web and network to secure investments, along with the resilience needed to handle rejection. We wrap up by discussing the growth and success of equity crowdfunding, highlighting the importance of seeking advice, preparation, and crafting a compelling narrative when seeking investment. Tune in for a wealth of wisdom and inspiration in this must-listen episode.
If you want to raise capital for your business visit us at https://netcapital.com/
Speaker 1:
Anytime you take on an investment, it's a long-term relationship. I think the average this used to be a statistic, I don't know if it's still the same anymore but the average venture investment lasts longer than the average marriage in America. So it's quite. If you take on an investor, it's almost quite literally getting married.
Speaker 2:
Hello everyone and welcome to Funding Innovation with Net Capital. I'm Kathy Kreisler and I head up marketing here at Net Capital, and today we're taking questions from our current issuers who are just starting out with their equity crowdfunding raise. So if you're a founder who's just starting out with your fundraising efforts or you're on the fence about equity crowdfunding, stay tuned for some really insightful answers from our CEO, rob Burnett. Rob, this is one of the most common questions we get from our issuers, which is what is the best way to prepare for my equity crowdfunding raise and how is it different from a traditional raise?
Speaker 1:
I can't recommend it highly enough Starting to build, organize and warm up your lists. So in a traditional fundraise, a list would typically be pretty small maybe 100 investors. You'd send personal emails to each one of them, maybe a pitch deck, maybe you connect with them on LinkedIn and try and organize a meeting. With crowdfunding. It's that on steroids. You're going to want to build as big a list as possible and as many lists as possible, and then you want to make sure you're in contact with them. So I recommend breaking down lists into a couple of categories. Everyone should have a friends and family list. It can be three people, it can be 100 people, but everyone should have that list of people who exist in your network who might want to invest, or at least you want them off within the opportunity. Some of you will have customer lists or some companies have presign-ups if they're not in market yet. A lot of you will have other lists around the business, so advisors and people who are interested, and maybe vendors or potential customers, things like that. So building that list can be good. And then one I'll dive into this in a second but certainly a list of potential angel investors or more institutional money can be very valuable. And then anyone who wants to work with larger marketing firms doing press releases or working with digital marketing firms on their lists. Those are all really good as well, but for each of those lists you want to make sure you actually have them written down or preferably not by hand, preferably in some kind of spreadsheet or something like that and then you actually want to talk to them. For a friends and family list, you might offer to grab coffee with people. You might just send them a nice personalized email that looks very unfancy, talking about hey, you've got something big coming up and you're going to need their help. For customer lists, you can make it a little more fan fairy and say hey, we've got a big announcement coming. Stay tuned, tell your friends, sign up, listen in things like that.
Speaker 1:
But most entrepreneurs underperform in this arena. They're not spending enough time building and then warming up their lists, because the first time anyone ever hears from you is, hey, I need money, invest in me. It typically has a low conversion rate, whereas if you're sending them emails already, right now, saying, hey, look at all the great work I'm doing on the business we're growing, we're building this new thing, we launched this new feature. And then they get a couple of those emails. They like your style, you learn a little bit better what they like and you get to practice your skills of chatting with your audience, whether that's in email form or something else. Then, when it comes time to ask them for money or build up the actual launch, you're much more credible, you're much more polished and you're ready to go. And so I highly, highly, highly. I kind of can't emphasize enough how much you guys should be building lists and having them in email service providers like MailChimp or Klaviyo and then being ready to go.
Speaker 2:
What if you're a founder who hasn't yet hired a marketing team or isn't good at marketing. What are some tools out there that you can use to bring tools out there to help them get started?
Speaker 1:
ChatGPT actually is a really great tool for doing first drafts of emails and asking for email calendars. So if you just say, hey, chatgpt, I'm launching a crowdfunding event, what cadence should I send emails at, it'll give you a rough justice. You should obviously review the whole thing. Read it. It's never a final draft, but it's a great way to do a first draft.
Speaker 2:
Great, thank you. And so one of our issuers is asking. He has been sending out video vignettes and what he wants to know is is it better to just put all of the content directly in the email, or is it better to send potential investors to a website of some sort with a form?
Speaker 1:
That's a great question. So it depends a little bit on your goals, but in general, my advice is to try to build a funnel. So this is kind of marketing 101, but I will admit I'm not the greatest marketer in the world. There's other people who are better at that than me but I understand some of the basics, and especially with investing, because investing isn't buying a product right. Investing is kind of like buying a dream, because you're essentially buying the chip. It's a little bit lottery ticket, a little bit kind of financial decision, a little bit gut purchase, where someone's buying a potential future reward which is really amorphous. And so with a sale like that and you guys should all think of this as sales with a sale like that, you're going to want to make sure you're really warming up and getting the very best leads you possibly can, and the best way to do that is a funnel. So if you think about, you know if you're what the top of the funnel is, the most people who will see your business. Now, some people you might have a bigger email list, so that's where you're going to get the most people into the top of funnel. For some people they it's going to be their Instagram, where that's where the top of the funnel is, that's where the most people are, then typically what you want to do is where companies make mistakes is instead of. Let's pretend I'll take Instagram as an example. Let's say your company has got 100,000 followers on Instagram. If you simply post on Instagram, come invest in my business, some people will click on the link and land up on your net capital page, but very few will convert. But if you post a little quick video on your Instagram page that says you know, here's what we're doing, a little teaser, a little Happy Meal size bite, and then it says if you want to learn more, either come to our website or sign up for this web webinar I'm running every week. Then someone comes and you give them something longer form oh, I come to the website. I've got an hour long video, you know. Or and I certainly got a place to sign up with my email address to learn more or I come to a webinar like this where you're pitching your business and talking about things and taking questions from investors.
Speaker 1:
Then the people who are who kind of take the step from the top of the funnel to that second level, they're much more invested, they've taken time they're interested and with them in that second piece of the funnel, you probably want to capture their email address or do something to kind of capture their information and then from there you send them to the capital and say come and invest.
Speaker 1:
And what happens is then you bounce between those two, because some people will go straight from level two to investing but others will need four or five emails after that saying, hey, you came to our webinar, do you want to come to another one? Can I answer questions for you or do you want to just go invest? And and that follow up, that constant follow up, is really important. So you know the number of entrepreneurs I've spoken with who said yeah, I've emailed everybody and no one gets back to me. And I asked them how many times they've emailed everybody. They say once, maybe twice. You know we're talking seven to 10 times. It will sometimes be what it takes. Basically, you should use those videos in a place where it can send people to, a place where you can capture their information.
Speaker 2:
And is it better to have one big long video or can you have a group of shorter videos?
Speaker 1:
That's a good question. So, like throughout their page. We definitely had some companies put little videos throughout their page. It doesn't happen super often. I'm not sure if there's any kind of strong evidence one way or another, but it sounds pretty engaging. I certainly wouldn't advise against it. But we see more often or I should say not more often, but we've seen more successful be more successful is people companies consistently putting out quality content. So instead of putting out 10 videos on your page in day one or maybe do that, but then also release each of those 10 videos, one a week, and help them tell a story over time.
Speaker 1:
Our most successful issuer by multiple metrics. They spoke to their audience every week for like five years, every week for five years, and they ended up building a list of emails. It started with 10 people and their email list ended up at over 100,000. By the time. They were ready to do crowdfunding in the capital. So they raised millions of dollars in a single day because people were so used to hearing from them. Yeah, and they were masters of creating a personal connection with their network. Right, because personal connection matters in this day and age of quick connections and digital marketing and digital media.
Speaker 2:
Absolutely, rob. Well said, and so one of our issuers is now asking whether it's worth seeking out other investors, like angels or VCs, when you're also doing a reg CF raise.
Speaker 1:
We're finding that some of our bigger companies are actually having quite a bit of success with angel investors and I think it's important to level set with you know, for anyone here maybe hasn't raised before, hasn't raised from more sophisticated inventials like angels or ACs, it's worth kind of talking for a second about what that tends to look like. First and foremost, the first step is to build a list. Great ways to do that are still on Crunchbase, but it used to be called Angel list. I think it's now just angelco or LinkedIn and just search kind of angel investor in your area or people with angel or investor in their title, and then it's. That's really hand-to-hand combat. It's really, you know, email them asking for advice. Hey, I'm in. You know I'm in. You know I'll pick up some Boston where we're based. You know you seem like you're a Boston biggest angel. I've got this business, I'm thinking about raising money and I just grab can I buy you coffee and can you, can you advise me on my pitch? And you should try to do that five, 10, 15, 20 times.
Speaker 1:
And most angel investors are pretty cool They'll, they'll, they'll come and chat with you about it. Now they might not invest in you, but they'll come chat with you about it and that's important for two reasons. One is it'll help you refine your pitch and two is angels investors know other angel investors. So if they don't like your pitch but they think it's good, they will introduce you to people who will like your pitch. And it typically takes, on average, 40 nos to get to a yes in a in a seed round. You know, depending on what statistics you look at.
Speaker 1:
And so, thinking about that order of magnitude, you know you need to, you really need to. Kind of having two or three investor meetings is probably not nearly enough. It's not even in the right order of magnitude. So I like the level set that. You know, starting to build a list of 50 to 100 angels and reaching out to them and trying to meet with as many of them as possible is a way to level set and get it going. Another one of our more successful raises if they met with I think they said exactly 40 or 42, 40 or 42 angel groups, so not even just individual angel but angel groups, and only two of them decided to invest. But those two were each worth well into the six figures each and that drove more momentum outside of just those investments. So those were very powerful. So spending some dedicated time to look for angels and kind of do that outreach can be very, very powerful as an addition to the rest of your fundraising efforts.
Speaker 2:
Okay, but when you approach angels, what's the best way to approach them? Do you ask them for money directly the first time you talk to them? Do you ask them advice first, or what's the best way to do this?
Speaker 1:
Yeah, I feel fairly strong. I usually don't advise many things fairly strongly. Usually I give it everyone kind of do what feels right. I feel fairly strongly that you should ask for advice first Anyone who's put the word kind of investor or angel in their LinkedIn description, for example.
Speaker 1:
They are bombarded by requests for investment probably just about every day. I mean, I know this because I'm not an investor but I happen to run. You know, some people mistake the capital for an investor or an investment fund and I get solicited at least once a week by you know what looks like an automated message from some much more being like I got this great opportunity, you just have to take a look. And when I get that, I automatically think that it is not a good investment. And I mean not that I'm even making investments right, that's not even my job, but it really. When someone's sophisticated and this is their job to make investments, it's very hard for them to take that kind of outreach seriously. You might get lucky and catch their eye with just the right statistic or be exactly in the right place, but it's going to be hard. So my recommendation would be to very much send a one or two line or hey, I'm in your city, you seem cool. I need some help with my business with. Can I buy you, like, literally, can I buy you coffee? I would really appreciate it. A lot of them won't respond, but a lot of them will and they'll say, yeah, sure I'll do it, or hey, you know, and you can always send a follow up saying hey, doesn't seem like this was right for you. That's totally fine. Do you know any other angels in the city who might be interested in my space who could give me some advice?
Speaker 1:
But investors, you know not to paint with a broad brush, but investors typically think they're very, very smart. Anyone who makes a living basically placing bets has to believe that they're smart, and so playing into that and asking them to be smart for your benefit can be really kind of nice on their ego. They tend to work as to work pretty well, whereas hey, give me your money. Not that you'd be that crude, but that is a much harder barrier to clear. Right, that's a instantly I'm nervous versus nervous versus hey, I really need your help. That's an ego boost. So that would be my recommendation around any, basically almost anyone. That's a. It's a good tactic to use with anyone you want to give you money is asking them for advice first.
Speaker 2:
Okay, and one of our issuers asked what's the best medium? Is email better than LinkedIn? Is one medium better than the other?
Speaker 1:
Yeah, if you can, email tends to be better, right. Linkedin is still a public platform and you can think about how you do it operate in your own life. My email, my inbox, is my to-do list, right. If someone sends me an email, yeah, I get quite a few marketing emails that look like they look real, but they're really marketing emails. I don't know. I don't know it, but I get a lot of those and I just delete them. But when someone messes me on LinkedIn, I kind of presume they don't know me, because anyone who knows me would just email me. So it's a higher level of skepticism, whereas, like, if someone texts me, I definitely text them back because, like, only, I don't use texting nearly as much for work, right. So LinkedIn's a pretty darn good tool, like, it's not like sending someone a Facebook message or DMing them on Instagram. It's pretty professional, it's pretty well respected. Like, I definitely connect with people on LinkedIn who I've never met because they sent me a message and it's genuine. But, if you can, the best way to do, especially, again, for angel investors. But it's a good way to start and a good way to think is, the more you can kind of build personal, a personal web, a personal network, the better off, right. So if you can find an angel's email, shoot them an email because it can make it much more personal. Even better if you can get someone to introduce you to that angel. Someone today just sent me an email saying hey, you know, hey, rob, I haven't spoken to you in five years, but this other guy wants to talk to you. Will you do it Like? I'm definitely gonna talk to that guy. I don't know if I'm gonna use his product, I don't know if I care, but you know it might not be a good fit, but I'm sure it's gonna take them. I'm gonna take the call even because it was a buddy of mine who I haven't spoken to in years but was a good connection and it's nice to hear from him. And so the more you can get.
Speaker 1:
Basically, my baseline advice with the any meeting you get, do not leave that meeting without getting a commitment for that person to introduce you to at least one, if not two or three other people. Now, that can be hard. They might not like you, they might tell you to go away. I'm not gonna ruin my credibility on you. I hate your idea, but in general, right, don't ever leave a meeting that's saying, hey, who else should I talk to? Oh, you should talk to X and Y. Oh great, would you be willing to make an introduction for me? And most of the time, people will say yes.
Speaker 1:
One thing I always like to tell entrepreneurs is our startups are our child and we all think our child's beautiful, but most of the people just don't care that much. And so people will be nice in the person. They will say, yeah, I'm gonna be happy to help, and then life gets in the way and they forget and they get tired and they don't pick the phone and they forget to file an email and blah, blah, blah, blah. So making is easy for people. Here are the one raising money, which is the hardest job basically in all of entrepreneurship, and so making it easy for everyone to help you is a good thing, right. So communicating, often communicating clearly don't bury the lead right. Put everything right out there. It can be very, very useful.
Speaker 2:
Now just to switch gears a bit, we have an issuer who has actually heard a lot of negativity from venture capitalists in terms of equity crowdfunding, regulation crowdfunding, and I wanted to get your thoughts on that.
Speaker 1:
Yeah, it's a really good question. It's something we've dealt with from basically day one. Venture capitalists, in particular. They provide a really important service. This is their industry, that we're. I don't want to overstate how much we're disrupting it, right, but it's our competition. If they don't hold all the power in the checkbooks, they lose some of their leverage.
Speaker 1:
But listen, that's a more esoteric argument, right? The brass tax of it is entrepreneurs need capital and VCs worry about things they can't control and they'd worry about downside risk, and to them, things they don't understand constitute downside risk. And so an investor that they might not understand like the crowd, right, unknowns just don't sit well with them. And the thing about it is like any bad investor can be highly disruptive. Taking on investors is a responsibility for any company and a bad investor can throw the wrench in the works of a lot of things. And so if you're a VC, you're saying I don't know what the crowd's going to do, I don't know what, I don't know if I like it, so giving them kind of the biggest benefit of the doubt, right, that's a legitimate concern. It's an investor they basically don't understand and they worry that it's going to put a wrench in the works.
Speaker 1:
I think the answer to that is typically trying to push on like okay, what in particular are you worried about? Because basically all of our biggest raises on the capital have gone on to raise institutional money. So there's a good track record and a growing track record of basically crowdfunding back startups, going on to raise larger institutional rounds and being successful and not disrupting them. And then one bit of ammunition for net capital in particular is the one line on the cap table. Right, your cap table is going to have one record owner and that typically calms down quite a few people. They worry about you having 1,000 people on your cap table and they realize it's only one. That typically calms 90% of the nerves. So I think that's some ammo.
Speaker 1:
But I think that, in particular, what I usually try to ask is what in particular are you worried about? Because the last time I had that conversation with basically a VC or the council of a VC, they kept coming back with conflicting answers. Literally, they'd be like, well, this is a problem. They're like, well, that has nothing to do with crowdfunding, that has something to do with something else. And then they'd say, but we're also worried about that. It was just the some more fierce fear of the unknown. What it came down to Now. That doesn't mean that people won't be irrational and say, well, I'm just not comfortable with it, but we're finding that that's exceeding me rare, at least from our experience.
Speaker 2:
Yeah, and even if you argue that within that capital at least there's only one line on the cap table, there will always be people who are scared of the regulation crowdfunding, and sometimes you just have to realize when it's time to walk away from a certain investor.
Speaker 1:
Yeah, and I mean I've never, I've never wanted to shy away from those things, right, like you know, there's all. People always have opinions. You know all of the stuff's hard right. We're all trying to start companies. There's lots of conflicting advice. There's lots of conflicting. I'm sort of looking for kind of motivations and interests and getting everyone to align is tough. I mean, I think you know anytime you take on an investment, it's a long term relationship that I think the average this used to be a statistic, I don't know if it's still the same anymore, but like the average venture investment lasts longer than the average marriage in America. So like it's quite like if you take on an investor, it's like almost quite literally like getting married. So you know you're with them for the rest of your company.
Speaker 1:
You can't undo these transactions and so you know taking it seriously and you know addressing people's concerns is, you know, not something that worries me too much, and the good part for us is you know something. Certainly there was a little bit more of a worry six, seven years ago when we were starting this out, but the track record is starting to speak for itself, which is really you know. It's good. It makes me happy, right, that people are having success and you know companies are still continuing to grow and get follow on investment.
Speaker 2:
Absolutely. Thanks so much, rob, and thanks everyone for listening. If you have any questions you want us to answer, feel free to email us at team at netcapitalcom and we'll try to answer them on our next episode, take care.