How does Huddle Fifty help businesses efficiently raise money
As VC money seems to be drying up a bit (according to Yahoo Finance, VC investments decreased by about 53% from Q1 2022 to Q1 2023), businesses have started to rely on the SEC’s Regulation Crowdfunding to keep on injecting cash in their operations.
At Huddle Fifty, we helped clients with their crowdfunding campaigns and realized just how profitable these could be. We elaborated a few strategies that have proven to be highly efficient for said clients. We quickly understood that most businesses were not familiar with the concept or opportunities offered by regulation crowdfunding.
How is VC funding different from Regulation Crowdfunding?
To make it simple, it mostly depends on how much time you have and the kind of help you are looking for.
VC investors:
Your usual VC (Venture Capital) investor is an institution, whose primary purpose is to invest in promising businesses for profit. They are monitored by financial institutions such as the SEC to make sure deals are being conducted in compliance with local and international business laws.
VC funding allows entrepreneurs to exchange shares of their companies for funds, to help develop said companies.
First comes seed funding, or angel investing. At that stage entrepreneurs usually pitch an idea, or a concept and need money to build it.
Post seed funding is organized in series, A, B and C.
Series A:
It refers to an investment in a privately-held start-up company after it has shown progress in building its business model and demonstrates the potential to grow and generate revenue. It refers to the first round of venture money a firm raises after seed and angel investors. It aims to help revenue growth, with a limit of $10 Millions.
Series B:
It is the second round of funding for a company that has met certain milestones and is past the initial startup stage. Series B investors usually pay a higher share price for investing in the company than Series A investors. It is used to stimulate growth, hiring and market expansion, it usually ranges from $15 Millions to $25 Millions.
Series C:
This one is mostly for large business expansions, international development or acquiring new businesses can go up to $50 Millions.
There are other stages after these 3, but companies rarely go for them. The usual path involves acquisition or IPO rather than an extra round of funding after the series C.
Those series depend on where you are in the development stages of your companies.
As mentioned previously, VC funding has been drying up rather drastically over the last year. So businesses have been moving onto Regulation Crowdfunding instead.
What is Regulation Crowdfunding?
Regulation crowdfunding investors:
Regulation, or Reg crowdfunding allows businesses to solicit retail investors (accredited investors as well as non accredited investors) to participate and invest in their companies.
Reg crowdfunding is also regulated by local financial institutions, but it allows businesses to raise funds via the crowdfunding platform they use, without having to be registered with the local financial institutions, only the standard filing is required.
To recap, Reg crowdfunding allows businesses to solicit a much wider part of the population but it allows them to do it involving much less red tape than VC investors.
There are different types of Reg models.
Reg A:
Reg A consists of two tiers allowing companies to conduct “Mini-IPOs”. It is addressed to bigger investors and is distinguished by the upper limit of the offerings.
Up to $20 Millions for tier 1 and up $75 Millions for tier 2.
Reg D:
It can be divided in three sub categories:
- rule 504 for securities offers and sales up to $10 Millions for a 12 month period. There are restrictions depending on the development stage of the company, the issuer is also unable to solicit the public or advertise its offer.
- rule 506(b) allows you to sell unlimited securities, but still no general solicitation or advertising, and investors must be accredited (there is a max of 35 non accredited investors that can take part in the offering).
- rule 506(c) is usually an issuer’s favorite, as there is no limit on the offering, and that general solicitation and advertising are allowed. All your investors must be accredited however.
Reg CF:
It has a $5 Million limit on the offering, and general solicitation and advertising are allowed. On top of it any retail investor can take part in the offering
The idea is to show that options to fund your business are no longer limited to VC or big institutional deals. In 2019, in the US alone, regulation crowdfunding raised north of $1.5 Trillions (SEC’s data 2023). More companies rely on this tactic every day, and as the practice is gaining in popularity businesses have to compete with each other for retail investor’s money, whether they are accredited or not.
How can Huddle Fifty help you build and run a successful Regulation Crowdfunding campaign?
Huddle Fifty has been specializing in the building and optimization of Regulation Crowdfunding campaigns for all sorts of clients in the financial services industry but also for tech and B2B SaaS.
To enable your success, we intervene at all stages of your projects, whether you need a brand new landing experience, or simply need an acquisition strategy:
- We design frictionless user journeys designed to convert your traffic. We also design any ad asset you may need to point your users to your site.
- The next step is to build a full funnel acquisition strategy aligned with your products/services and goals. The full funnel part is crucial to keep your offering top of mind, regardless of your industry, the Reg CF space can be competitive and if you focus on only one or two channels you may not maximize your chances to convert.
- Finally we build an executive reporting suite for you to have access to your data in real time. The more transparent results are, the easier it is for everyone to agree on optimization tactics.
We would love to talk to you about our most recent successes in that area and discuss how we could help you reach your fundraising goals.