Forbes, in their June 25th issue put out some guidlines for investors that might be ooking to invest in companies listed on kickstarter.com, and we thought it would be useful to turn the equation around, and address the information that companies need to provide in order to attract crowdfunding investors using this source.
1. Generally, investments are limited to $100,000. If you’re asking for more than that, you have to provide audited financial statements.
2. You should, according to the SEC (who hasn’t issued any final rules yet), take money from only ‘accredited’ investors, those with net worth of between $250k and 1 million. In addition, the investment should be limited to 10% of their total assets.
3. You should have a business plan done; we have free templates on our website, www.theasoe.com. For a $100 review fee, we’ll provide a review and suggested areas of improvement.
4. Financial statements: should be audited by a CPA; frankly, we can’t imagine someone investing anything in a company without audited financials, but that might just be us. You should be prepared to provide personal financial statements and tax returns for 3 years, too.
5. Licenses and registrations: Legitimate businesses, even online ones, should be licensed by the city in which they operate with a business license. Their tradenames should be on file with the State.
6. Litigation: have you or your company every been sued successfully, and where’s it recorded, even if unsuccessful? Pacer.com gives details of suits for $.10 per page, presumably of the entire court case. If there a lot of complaints, suits, regardless of outcome, you should explain your side of all these actions.
7. No fudging on your resumes of your key executives. This has become a surprisingly big deal in recent years, because more are doing it. Be prepared to defend your role in the company.
8. Website(s): Do you have one? What’s it used for? Does it look up to date?
9. Required disclosures: You should disclose how much you’re seeking to raise and the terms. Also whether anyone in the state has pronounced on the legality of the securities.
10. Tire-kicking: If your company can answer all the above questions affirmatively, then expect some time-kickers to show up on your doorstep. Inform your employees!
There’s nothing unique in these requirements…..but be prepared on both sides of the table.