Equity Crowdfunding

I spent some time this past week speaking with a few other crowdfunding marketing agencies. It was interesting!

The conclusion?

Raising capital via REG CF is expensive.

Why?

Well, let’s just take digital advertising (of which most is conducted on Facebook) as one expense item on the list.

General consensus is that it costs $1 to send a targeted/retargeted pair of eyeballs to an offer page, and it takes 50 eyeballs to yield a $500 investment. Yes, on average it costs approximately $50 (10%) to acquire a $500 in investment.

Cost per Acquisition (CPA) = $50.

Return on Ad Spend (ROAS)=10

$5M via REG CF raise based on the above:

$500k on digital ads

5–7% portal fees

1–2% for Legal and “Other”

Total cost of raise : 16 -19% or $800,000 -$ 950,000

However, due to the ability to utilize a rolling close, you do not need $800k – 950k before you begin your REG CF raise, but, you will need approximately $20k – $40k to get started

Many use ROAS as a measure of advertising effectiveness, however, unlike when selling a product, within crowdfunding I prefer to use CPA and total cost-of-capital.

Want to reduce your CPA?

Conduct prelaunch — build, test optimize.

Do you know that conducting prelaunch has always been allowed when equity crowdfunding? You just have to know how to stay within regulatory lines to be able to do so, something we’ve already been doing for years. But, don’t take my word for it….reach out to Irwin Stein and I’m sure he’ll gladly explain.

Gaining momentum out of the gate has a knock-on effect by reducing investor acquisition costs dramatically. Having a substantial amount already invested in your live campaign before running ads can substantially reduce CPA’s too.

To all you budding REG CF issuers out there….Be Smart. Conduct prelaunch.

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