Founder and CEO of the Australian Small Scale Offerings Board (ASSOB) Paul Niederer has tackled a persistent question: Should you use equity crowdfunding to raise capital for your company? Niederer has created a “fundability” diagram to help potential issuers decide whether to move forward – or not.
Niederer’s thesis is driven by the fact that crowdfunding, regardless of the variant, is no field of dreams. Most investment crowdfunding issuers already have all – or much – of the money lined up in advance. Generating significant investor interest may allow the issuing company to go into over-funding. Falling short of a funding goal is definitely a sign of weak investor interest but may be a sign of too little-advanced preparation.
Niederer segments the circles into three different categories: Story, Team & Supporters. The intersection of the circles a divided further:
- Relevance. The story being pitched needs to be relevant to thesupporters of the product, the service, the technology, the team, the geography or for whatever reason they are “supporting”.
- Capability. The team must be capable of implementing the story they are selling.
- Credibility. The supporters need to see the team as credible and worthy of their trust.
There are no guarantees of course. Equity crowdfunding can be a viable option for SMEs (and other asset classes) by leveraging the power of the internet to more effectively communicated a message to a far wider audience. Niederer has been engaged with over 320 funding rounds, raising more than $142 million down under so he speaks with a level of experience that few others have (yet) achieved.