How to Raise Money with Equity Crowdfunding

Speaker 1 (00:00:02) - Hey good day everybody. Welcome back to the deal Scout. Now I hope you enjoyed the seven minute deal. Talk about crowdfunding and the different types and maybe some stigmas. about crowdfunding and specific. I invited Mr. Fuzzy, which is a really, really cool name that will will go over how you earn that. But, we, we we invited him back to share more of his story and to give us deeper insights on crowdfunding itself. So so with that fuzzy welcome back to the deal, Scout.

Speaker 2 (00:00:31) - Thanks. Appreciate it. No, it was good. That was a good seven minutes. I got my sweat going a little bit, but now I'm feeling good. I'm in it.

Speaker 1 (00:00:36) - Yeah. Well, I, you know, after you've seen a, you know, a couple thousand pitches and I've, you know, I've, I've interviewed 2500 people and you hear a lot about deals. I feel like if we can't articulate a deal type or explain the high level of it in a, in a concise period, then I think that we as dealmakers need to, you know, sharpen.

Speaker 1 (00:00:56) - And I think you did such a great job. And with that, we asked you to come back on to the show to go deeper details because I was curious. So first let's start with this. Where did you get the nickname fuzzy?

Speaker 2 (00:01:08) - Sure. Yeah. So, used to have a fairly popular little rock band back in the day, and I had a beautiful mohawk with feathers all woven into it, and, I got the nickname then, eventually I had children. All my hair. Well, eventually I had children. Then I started working with startups. All my hair fell out and the nickname just stuck through all of this. And it's funny how many times people are like, it just doesn't feel very professional. But then after they work with me, they're like, you know, I feel fuzzy every time. I feel so good every time we talk that I just kept the nickname. And it's been like a branded thing for years now. So yeah, that's that's how I got to that part for sure.

Speaker 1 (00:01:43) - So you were in a rock band. What instrument did you play?

Speaker 2 (00:01:48) - so guitar and songwriter. So I used to own recording studios. That's actually how I got into crowdfunding. I had six, excuse me, four recording studios across the United States, Detroit, Chicago, Chapel Hill, Louisville. We were building our fourth one, had some venture capital money and was basically kind of making a pretty unique minor league music industry thing. And, it was very trendy. and then eventually my VC money ran out because I was not a hockey stick. And I found crowdfunding from that. Right? Because I was like, screw that. I'll never do that again. I'm going to go this route. And, yeah. So I wrote a whole bunch of songs. I got three albums out there. You can go search the Sugar people if you want to find that. And, you can. Yeah, I got lots of songs out there. I wrote commercial jingles for a while. Oh, yeah, I've done it all in that world.

Speaker 2 (00:02:28) - So.

Speaker 1 (00:02:29) - All right, we're going to get into crowdfunding, but let's let's stay here for a minute. Sure. We've got the sugar people and we got fuzzy from the sugar people. Yeah, yeah. How did y'all come up with the sugar people? What's the story behind that?

Speaker 2 (00:02:42) - everybody loves candy, sugar, sweets. And when you really get into the music, you'll find that it's. It just. It just warms you up. It feels good. And it was just like candy. We just have our own candy line. like sugar. These, like, hard rock candy lines. We had t shirt. We had a whole thing. We were out and we were doing all of it. This is all like early 2000, you know, kind of a whole nother land when it comes to what music is now. But yeah, that was our that was our world.

Speaker 1 (00:03:07) - So who is your music inspiration growing up, as you were listening, you know, to cassettes and maybe CDs and maybe even records.

Speaker 1 (00:03:15) - I don't know how old you are, but like, who was your music inspiration?

Speaker 2 (00:03:18) - Oh, I'm an I'm in the 80s rock n roll band. I want my some GNR, some. I want some lead guitar solos. I want some finger tapping. I want all that skid row. I want that stuff. That is my, my bread and butter right there. Now, granted, the music I made is all like neo soul, like, very downtempo chill. But yeah, I want a guitar solo rip in my face.

Speaker 1 (00:03:36) - Have you ever been have you ever been at a, like, a bar or like a, a club or even, you know, whatever, just sitting there having a few drinks with some friends, and then one of your songs came up on the jukebox or over the top.

Speaker 2 (00:03:48) - I have had it where we were like, we were on a, camping commercial for a while, so like, music was there, which was always intriguing. But what's more weird right now is when my kids put it on Spotify and there's this like, all right, what are you guys doing? But they're not really doing it to make fun of me.

Speaker 2 (00:04:05) - They're like, oh, that's pretty cool. Yeah. So that's actually more weird now. Is your kids listening to it and thinking, it's all right.

Speaker 1 (00:04:12) - So yeah. So in the, in the early days of your, your growth, you were doing this minor league music scene. And man, it was it was doing good. You raised some capital and you experienced firsthand the challenge of raising capital, maybe even for a not high growth hockey stick tech company, but for something that maybe wasn't the right fit. Then you landed in crowdfunding. What was that first like land? In crowdfunding? We were like, wow, this is interesting. Yeah.

Speaker 2 (00:04:39) - So the way the model worked was, I found I just saw this huge gap in actually artist development. Right. So as this time you have to think this is like mp3's are really starting to be everywhere. The iPod is coming out and and now all of a sudden it was starting to become a band has to just form and have a hit immediately.

Speaker 2 (00:04:57) - And I found that it took me years to write songs. So what I. Ended up doing is that we went to Kickstarter. We met Perry Chen. This is before Kickstarter existed. This is like a year before he was in Detroit talking about, you know, this idea of crowdfunding and Kickstarter. And I was like, hey, we need to chat. So we ended up my business partner and I, we hounded him, we found him and we we sat down. We said, this is what we want to do or this vision we have. And he's like, you got to look at Kickstarter, this thing I'm building. So we ended up having, I don't even know, the 20 or the 30th Kickstarter ever. And the model was a band would come to us, we would crowdfund a seven song EP live in front of a studio audience, and we would produce that content. So they'd get a video, they'd get, a seven song EP. And then eventually I partnered with a vinyl company that we were putting out vinyl again.

Speaker 2 (00:05:40) - Think of that. This is like 2006, 2007, right? So what would happen is, is I would basically have everything you need to see if a band was could be signed or not signed. right. I had their data, I had how many people supported it, I had what products they were purchasing. If there was a band member in the band, I'd be like, gotta get a new bass player, right? I had all of this data, so we ended up getting like 7 or 8 bands signed, one of them being Greta Van Fleet. You might know them. They were one of our early bands. I have them recorded at like 14. so we just we were building this process so a band could grow in our system and then go to other locations Chicago, Chapel Hill, Louisville. So the goal was to have these all across the United States, and that's where VC kind of got excited about. It was like, hey, I think there's a scalable model here. what really happened is social media change.

Speaker 2 (00:06:27) - So Facebook changed, you had to start running ads. There was no organic traffic. And now all of a sudden, my business model did not look as good when I have to spend, I don't know, $10,000 in paid media to get a band, you know, recognize, to raise some capital. So that's where it just started to shift and kind of unravel. But but that's what I was building. is, is, you know, a sort of a mini data company around content for each one of these artists to see if they're good or not.

Speaker 1 (00:06:52) - Yeah. And then the Jobs act happened. Yep. Right. So you went from this, this, reward basis. I'm like, if anybody wants to know that three different types of crowdfunding, you know, you could go back to the seven minute chat, but, you know, the the reward type to equity type. So now you're moving into like companies are able to raise capital. You already had experience playing the game of crowdfunding, finding people, building the database, giving them the right reward.

Speaker 1 (00:07:23) - What did that look like when you when you pressed it into equity?

Speaker 2 (00:07:27) - so to be honest, it was the Wild West for at least two years. Nobody had any idea what we were doing. It was just like, I think we can do this. I would even say at that point to, like, even the SEC wasn't quite sure. Yes, there was rules and of different types of language, but truly it was the Wild West. We were testing almost everything when it came to paid ads and organic and and it was such a new novelty thing that when I say this, I would spend $100,000 in paid media and raise you a million bucks. It was just like, that's all I really had to do over and over and over. And I was just rinsing and repeating, then again, now all of a sudden, more companies started raising the platforms change. The SEC kind of kind of really got wind of what this really this whole thing was going to be, you know, but that's really what it was like.

Speaker 2 (00:08:12) - It was just trying almost anything and everything, you know, getting our hand slapped in ways of like, you can't use that emoji anymore. Oh, okay. We won't use that emoji or you can't message quite like that, you know, just because again, you know, when you have one of the first or six, you know, first campaigns on a we funder or a start engine, which are platforms for anybody that doesn't know, like portals where you can raise it was just kind of why it was just wide open. It was the glory days, we like to call it here. of of equity crowdfunding. So.

Speaker 1 (00:08:39) - So when it comes to, you know, you mentioned this, but this is a you know, this is a concern for me having a media company and doing podcast interviews. You, you kind of like say it nonchalantly. The yeah, we got slapped. Don't use this emoji. You're not allowed to use money bags if you're talking to, you know, open solicit with money and you're not allowed to, you know, whatever.

Speaker 1 (00:08:57) - Right? What what was it like getting a a letter or a call or an email from the SEC or Finra? Yeah, it was a bit scary.

Speaker 2 (00:09:05) - Yeah, yeah, yeah. So I don't ever want to do that again. But it was just I was just completely naive. Right. You just didn't I mean, it's like I always try to tell people like, imagine the insurance business in the 1900s when it first started, like you just were like, I don't know, I think we can do this. I think we can do that. And really, the biggest thing was that transition of like my team members from Kickstarter Reward world to equity world, getting the whole team organized, getting everybody understanding the different types of languages, even myself included. Right. Like just that education process. But yes, now, you know, many years later, yeah, it's a whole different ballgame. I mean, now I've even wrote ChatGPT bots that act like compliance lawyers and take anything and everything that's been flagged.

Speaker 2 (00:09:46) - And now I let my ChatGPT bot say, hey, blah, blah, blah, blah, blah. Don't do that viral hook. Don't do this. but again, we're just again, you gotta go back, what, eight years now? Nine years now. You know, it's just was a different world, but not a good feeling to get that email hiring the the. Finding the right lawyer that takes your case, realizing that you're just a small guy in this and, you know, and eventually, you know, it wasn't that bad, but it was just like, yeah, you don't want to do that.

Speaker 1 (00:10:10) - So, yeah.

Speaker 3 (00:10:12) - You lose sleep.

Speaker 1 (00:10:13) - Over those kind of things because you you want to go out, do your business, help people, you know, like you want to build stuff, but you always have to have in the back of your mind, like, is this compliant? Am I going to get in trouble and all that stuff? So it's it's it's scary. It's terrifying, especially in the world of recorded media.

Speaker 2 (00:10:31) - Oh, 100%. Yeah. So like recorded media can be challenging. I, you know, very rarely do I do anything live. just, you know, anything because.

Speaker 1 (00:10:38) - Everything's in case.

Speaker 2 (00:10:39) - Yeah. Just in case. Send it to a lawyer, get the compliance, make sure we didn't say anything stupid or put the the right disclaimer. so, yeah, all of that is. But it is. There is a natural tension even right now as we we do this of marketing tactics in 2024 and a rule that was wrote two years ago. Right. So there's just always this tension. And I get it, you know, I, I in my world I'm more around like, hey, we're kind of doing this tool now. This is the trend. This is how we're doing, you know, like maybe not influencer content on TikTok, but we're doing, you know, you know, user generated type content. Well, where does that really fall into this? Right? Is are they or are they just reading a script that I wrote that is compliant.

Speaker 2 (00:11:18) - So again, you just have some of these tensions that are being pulled back and forth. So, you know, it's really challenging to go, hey, I know you just hired me to be as creative as possible, but I can't actually do it in this industry because of a rule from a couple of years ago, you know? So there's always a little bit of that tension, no matter what in these types. I mean, right now with paid ads, super competitive, you know, you're just you're trying to do anything you can to get a return on your ad spend, in an already challenging world of not tracking no retargeting, each portal kind of does the data differently, and all of a sudden you realize, like, geez, I already have ten handcuffs. Now I have an 11th handcuff. Just trying to get results for for an issuer so it can be quite challenging.

Speaker 1 (00:11:59) - Yeah. So with those challenges, what that does is it weeds out competition right in the the those who are good or better start rising to the top and you start to see, you know, the people who've done 180 crowdfund deals like yourself.

Speaker 1 (00:12:15) - Right? So as you're doing this, what are some of the things that, what are some of the, the, things that have worked well and some things that just do not work in your experience?

Speaker 2 (00:12:26) - Yeah. So first and foremost, I actually start with, you know, is this company even investable? Right. There's it's not that challenging to actually get up on a platform. Yes. It's work. Yes. You got to file a form seed. You got to go through all these headaches. But like it's you know, it's filling out paperwork at the end of the day. Right. The next big challenges is are you even marketable? And my biggest thing is can I first get my mom to actually understand what it is? That's my running joke because my mom's name is cookie. I'm like, can I get cookie to understand what you're doing? And you'll be you'll be blown away on how many times it's like, yes, they have an idea that is phenomenal in 20 years from now, or it's so in the weeds of, you know, a cancer drug thing that only this one specific doctor would even understand this language or this term, this, these terminologies.

Speaker 2 (00:13:10) - What am I going to do with this? Like, I can't, you know, there's just not enough eyeballs to even see this. So first I go through all that. If I if from there I can start to find answers or I feel like, man, the CEO has got a great story, he's investable. then I can start to shape what's my what's my outreach. And now it's going to probably be a lot of email outreach, LinkedIn outreach. What I refer to that as sort of internal spheres of influence, like who could I email today? Who could I, you know, who could I have an event for, right? These things I could truly control. And then I have an external sphere of influence. And that's going to be like, oh, I put out one social media post on LinkedIn. All right. Well, like that's great, but you really got to have a combination of this external and this internal. And you have to. And where that Venn diagram is, is what ultimately will start to work for your campaign.

Speaker 2 (00:13:56) - And it could be different for everybody, right. Like, hey, I just want to do podcast. Podcasts are going to send you into an opt in page, opt in page is going to have a welcome flow, right? That might be for one issuer. We might do an evergreen webinar for another just because it needs more education. But the biggest thing is I got to find a way to get 25 to 30 touch points before anybody thinks about investing. Like, if I don't get that, nobody's, nobody's, nobody's investing. So how do I get those many touch points as cost effectively as possible, as quick as possible, and also have the touch points be sticky like they actually stick? Not just like, you know, a social media post on a Tuesday afternoon.

Speaker 1 (00:14:34) - So yeah, for sure. And what I, what I heard is, you know, as you're approaching this, is this company investable. Is it marketable. Right. So investable. What are some of the key components on if you're looking at a company and going this is not investable versus this is.

Speaker 2 (00:14:50) - Yeah big one in my world specifically is valuations are just through the roof. Right. You're just you're evaluating you know well over $1 billion. And it's like you haven't made any revenue like I'm sorry. You know I get it. That's. A great. But you're, you know, there's no meat on the bone. Basically, it's how I describe it, like your valuation is so through the roof you have you're just not actually really getting any real value to these early adopter investors. Right. These are people coming in with 500 bucks, a thousand bucks. They want to see some meat on that bone, meaning that there's, you know, that it's not going to be all just gobbled up or their valuation. So ridiculous. So that's really like the first thing is do the numbers even make sense at the end of the day.

Speaker 4 (00:15:28) - Yeah. And then you go.

Speaker 1 (00:15:30) - Is this marketable. And one of the the the things that you use wood cookie understand what this is. And could cookie maybe even share with her barber or the lady who cuts her hair? Hey, my son's building this and this is what it can.

Speaker 1 (00:15:45) - Can she share that? Right. So I like that. Is a company investable. Is it marketable? Then you have to shape the story then share the story. Now when it comes to sharing the story, you've got your internal sphere of influence and then you have your external one. One great thing that I've seen in, in crowdfunding is you're able to share with the world, with other types of investments. You're not allowed to talk about it, right? You're not allowed to write a marketing post about it. You're not allowed to share about it unless you get the person to open their wallet and show you how much money they have in their bank account, right? Like, how do I know if they're an accredited investor or not? Right. So when when that happens, have you found that you leveraging crowdfunding, have you found that it it does attract some larger check riders.

Speaker 5 (00:16:34) - Eat.

Speaker 2 (00:16:35) - So I'm going to go back to something to talk about. It's I look at it as more as wins.

Speaker 2 (00:16:39) - Right. So, there's almost no big angel investors or VCs ever coming into a reg CF deal. I mean, I just, I it might be few and far between or something might have something to point to. You might have that lead investor show up and put 20 grand in. But when we start talking about $100,000 checks or even end up, they're not going to come into a reg CFDa. They probably want different terms. They don't want to be under another lead investor. Right. So they just it just doesn't make any sense. So typically for most of my deals, I want a reg CF running and a rigged at the same time, potentially on the same terms. That way if I do get it, basically I catch a bigger fish. I have a place to put them. They might have. Maybe they have different terms, I don't know, maybe they have different, different rules over there, but they have a place to really go. so that it makes more sense in that way, as a guy like myself is I'm sifting through data and I'm noticing like, hey, this is a pretty big, you know, family office or a pretty big, angel group.

Speaker 2 (00:17:33) - I'm not even going to send them the CF deal. They're not going to see it. However, sometimes, though, in my angel groups, when I talk about that win is I do want to take the win from a Reg CF the story of it and go, hey, we had X amount of this and this much traffic. Our cost per acquisition was this like it really took off. We really honed into our marketing message. Those are all great bullet points for when you are pitching the VC, the angel group, that whatever it is and say, you know, we've had a track record. I think the other one other nice little thing that for an issue or two is it does take a little bit of pressure off of, do I really need VC right now if I can open up this, this vehicle of retail investor. Right, like consistently or I built that mechanism, I don't always need to be. So like I gotta get a VC in here right now. If I don't, we're just never going to make it right.

Speaker 2 (00:18:20) - You you at least have a little bit potentially more power. Now for some businesses you're going to always need big money here. You know, the vertical is just like, I need $50 million, $60 million. I'm a battery company. Like you're not going to do that with all retail investors. I just I've never seen that. I don't think it'll ever work. So. So you just. But at least for a lot of businesses, if you can build this mechanism, it just takes a little bit of pressure off that, you know, that you can go back to your community when it when it makes sense. Yeah.

Speaker 1 (00:18:44) - It used to be like your, your friends and family round. Then you'd go to, you know, maybe some local angel, then you'd work your way up to maybe some VCs and, you know, family office and work your way up to institutional and then one day go public, right, and cash out and get a yacht. Who knows? Right. Yeah. But what the crowdfunding has done is it opens up the friends and family to a larger a larger a larger, a larger pool of people, a larger group of friends.

Speaker 1 (00:19:14) - as you've done this and as you're you're building this out, you said in our first interview together, the seven minute series you talked about, keeping the cap table clean. Now, people could always go back and listen to that. But you said that there's a few things you might want to do with keeping your cap table, your capitalization table clean. For instance, maybe using a safe or an SPV. Right. You explain the SPV, process. What do you mean by maybe using a safe node?

Speaker 2 (00:19:43) - Yeah. So safe node is going to be people can invest in at a future round valuation. Right. So so it's another way, another vehicle to sort of take on this, this money, and actually have it in writing what that person invested in. Like, so there's basically terms, right. and define terms moving forward. So it's a little less gray area than, hey, this is my buddy that I play golf with. He just gave me $50,000 and he's a little unsure of, well, wait, what did I get? What am I actually in.

Speaker 2 (00:20:17) - What is the valuation? Is the valuation now the valuation down the road. So those are the murky gray areas that I'm trying to avoid when I when I'm talking cap table. Right. Because you don't want to get to the VC and go, oh no, no no, we are totally clean. I just have my buddy who I play golf with. Like he gave me 50 grand and then they go, well, you know, I have.

Speaker 1 (00:20:36) - To do get.

Speaker 2 (00:20:36) - What did he get the whole company, you know, 51%, 1% like again. So you're trying to avoid those types of things and you're I don't think you can like, I mean I've taken money. I mean, I've had friends put money into my other companies. Right. Like it exists. I just think that I my mistake was not thinking further down the road. Right. Not thinking about these things. So that's what I discussed when I'm saying keep it clean, you know, it's you know, even if it's just a spreadsheet, it's just that you're aware of what it is.

Speaker 2 (00:21:06) - And there's that offering. So again, I like some I like safe sometimes like the SPV, the D. It's just that there's our terms that that's what that person. That's why that person gave you the check. Yeah. So you get this. You know.

Speaker 1 (00:21:19) - I had this conversation. I worked with an incubator, worked in a venture group, worked with, entrepreneur in residence program. And one of the questions I have is, how do I raise money? What's my business worth? Where do I even start with? Evaluation. So when doing a crowdfunding, how do you even start that conversation? Like how much do we actually need for this to make sense? And then what do we give the investors or offered to the investors to make it a win win for both players? Yes.

Speaker 2 (00:21:48) - So I get that question probably four times a week, five times a week from all my calls. It's a it's a top question, especially for people getting first, getting into it. for my answer typically is like it's the golden bear syndrome.

Speaker 2 (00:21:59) - It's not too hot, it's not too low. It's we're trying to find it right in the middle. And then I say, we got to go do some some research. So in our space, there's some pretty powerful tools out there like Hub Toss or King's Crowd. And they're just big databases of equity crowdfunding deals. What are going on? So I'm like, hey, well, let's just go look at your vertical. What vertical are you in? You know, what are other deals? Are you in the ballpark of them? Are you priced too low, priced too high? Like again, get some rudders on the conversations because again, you can, you know, just pick a number, out of thin air. So I start there, then I'm going to pitch book. and then at some point, I actually am being really honest with myself and going, where am I right now? You know? Yes, every idea is $1 billion idea, but what vertical are you really in? How much data do you have behind the scenes? Do you have any? Do you own any IP of what you really do right now? And the more that those answers are like, no, nope, nope, probably just keep bringing that valuation down to something that's like, yeah, we're 6 million.

Speaker 2 (00:22:54) - We're 10 million. You're not 100 million. I mean, you're just probably not. And and again, I think if you're more realistic along those lines that CF is going to, people are going to feel like, all right, I'm getting a really good value here because I do think it might be 100,000,000 in 10 years, you know, or 20. Right? I'm right now I'm in the next five years, one, you know, so so again, if people feel that value that they're getting in on this, then, you know, it's going to be a much easier pill for people to swallow to get that investment. And so there's no right answer. There's no like do this formula. It's just get rudders on it and then be really honest at some point with yourself about where you really are right now. so.

Speaker 1 (00:23:34) - Yeah, how do you know you're too soon for crowdfunding? And then how do you know that you, you might be a little bit too further down the line, and maybe crowdfunding would actually be harmful to you.

Speaker 2 (00:23:46) - Yeah. So first one, if you do not have a crowd, there is no such thing as crowdfunding. It's just.

Speaker 1 (00:23:52) - Funding. I don't know.

Speaker 2 (00:23:53) - Anybody doesn't understand that. So if you come at me and you say, man, we've got 75 subscribers in our MailChimp account, we're ready for crowdfunding. I then come see me in about two years. I need, you know, who am I reaching out to? Who is your community? Who is your crowd? That's the work. Again, getting on a portal is not the work. The work is. I've got 10,000 absolutely rabid fans who want to get in on this. Or, hey, I'm an e-commerce company and we've sold a bunch and we we think people would really come to the come to the plate to let us grow. If that doesn't exist. I don't know what you want. What do you want me to do? Right. so that's that's what it looks like to see if you're too early. Now, that doesn't mean crowdfunding doesn't make sense.

Speaker 2 (00:24:34) - It's just your work, then, is to build that crowd. Lead generation, getting your newsletter up, getting this community built. If you don't have it, there's just won't be. Who do you want me to talk to you now, the other question is a little bit more interesting. I think that there's a real trend happening right now, and I'm seeing it across a lot of these angel groups and stuff, companies that are really established, you know, they've been in business. I'll give you an example. One, I have a Social Security disability company. They've been in business 25, 30 years, but they're looking at crowdfunding more as a community round instead of crowdfunding. And what I mean by that is like ten investors, not 5000 investors. So still a reg CF, but they only want to raise 2 million to move some investors around or get a, get an in a buyout, an investor. Right. So they're just looking at it differently. Then we're going to go run Facebook ads and build this huge.

Speaker 2 (00:25:21) - They're saying we're going to use this exemption to actually be more just to be strategic and put $2 million in through this and, you know, do a couple of things, but they've got a track record of 30 years in business and, you know, all this sort of stuff. So it's it's it's been intriguing. And I think we're going to see more and more of that as people or as this industry kind of matures and people look at it more of a community round. Instead of this crowdfunding, which has three different terms, like we started in the beginning, right. Like which is somewhat confusing.

Speaker 1 (00:25:49) - So yeah. So this is interesting. So you're seeing more mature companies come through leveraging crowdfunding almost as a community round, but they're using it to provide maybe liquidity for an investor and maybe clean up the cap table that I've never thought of it that way. Yep. Yep.

Speaker 2 (00:26:06) - that's and that's a lot of me here. I got 5 or 6 companies right now that are these are businesses. I would not call these a startup.

Speaker 2 (00:26:13) - They're they're a business. And they're just the more that they really get into the exemptions and the rules and what we can and can't do, it makes a lot of sense, you know, and and you can still open it up so you can still do again both a reg Deanna regs CF. So let's say even if you wanted to open it up for your employees. Yeah I got one company that's got 100 employees. Maybe they're. Is like a stock option into this thing somehow. But you build it into this exemption and it's it's just, again, keeping cap tables clean, being, you know, being on the up and up with the Finra and the SEC, right? You're doing it all the right way. So there's just interesting things that I think are going to continue to happen in this, that that's what I'm excited about in the industry is how does it get out of mom and pop, you know, garage to a company just looking at it differently, you know, and going, oh, this is an interesting option for us.

Speaker 1 (00:27:01) - Yeah. Yeah. It's super, super fantastic. I love I never thought of it that way for I, you know, you always think of it as a startup. You always think of it as, you know, the band back in the day looking to raise some money so they could scratch a final, you know? So like, that's very interesting of more mature companies leveraging these, these tools. To raise some capital and do some interesting things with it. Wow, cool. Thanks for sharing that. That was of course very fantastic. So when when you're working with a startup, a startup comes to you or a business, heck yeah, a business comes to you. They got an investable business. They've got something that could be marketed pretty well. They've got a story they could that could be shared. And then they go, okay, nuts and bolts. What's it look like? Right. Like we're looking to go this route or this route. And maybe that route is, you know, we're going to hire an investment banker or we're going to, you know, hire someone to do investor relations and try to raise money from friends, family, family office, whatever.

Speaker 1 (00:28:00) - First, crowdfunding. What are the nuts and bolts of like, how do you how do you weigh that out?

Speaker 2 (00:28:06) - Yeah. So, one first listening to the CEO and what the you know, what their goals are and, and then pushing them into the right, right bucket. Sometimes the right thing is to go get that broker dealer or that investment banker and just go after, you know, very specific, types of investment. you know, it's very similar to me. Like, that's a ground game. You got to get meetings. How many meetings can I get? Can I get ten meetings a month? Can I convince that person? Can I do follow up? So again, now in my world, that's just a really solid CRM and, and a, that, I don't take no for an answer mindset. Right. Like just banging. Right. That's just so that's, that's a vehicle and that exists. in my world, I start to build, well, what is this crowd and community? So I start with educating everybody on four personas.

Speaker 2 (00:28:55) - First personas, people that know, you know, your brand, know what you guys do but have no idea what equity crowdfunding is. So how can my marketing remove any assumed knowledge I have? You know, I have never heard of Start Engine. We fund a republic. Nobody's ever heard of these things, right? So how do you educate that community as to what they're even going to get into? Second one is going to be people that know the brand and know crowdfunding. It might be 20 people. It's just not a huge list. But okay, we need them to invest on day one so that we get some momentum, right? So how do we get them kind of prepped? third one is people that know crowdfunding but don't know your brand. So great. You're in my newsletter to 25,000 investors. They could invest in everything today. They can invest in Tesla and Apple. Like why are they investing in you right. So I have to educate that. And then the fourth persona is people that don't know either they don't know your brand and they don't know crowdfunding.

Speaker 2 (00:29:44) - So now I think Facebook ads all right. Are we just going to run Facebook ads and spend millions, you know, 100 thousands of dollars maybe. But more than likely, we're not doing that because we're doing some sort of fundraising. So I try to make sure that my expectations are set with that issuer to say the it's only these four personas. Now, how are we attacking? So it might be persona one and persona three. Great. We're going to target my investor list. Or if you're on Start Engine they have an investor list. you know, but friends and family or people in your community, they need to get this type of marketing. And you're really trying to build out these flows and funnels to get those touchpoints up as high as possible. So almost all of it's going to be lead generation investors opting in and a very long, nurturing sequence that just basically takes this whole 40 minute conversation. And then here's a little email. Here's a little email. Here's a little email. What they're actually getting into, if they decide to put their Social Security number into a website they've never heard of, right.

Speaker 2 (00:30:39) - Like, what are they getting for that? Because that is a big ask in today's world. Right? So, you know, that's what we're doing is just making those touchpoints happen and then turning the levers on and off based on, you know, budgets based on audiences, verticals, time of the season, you know, is it winter? Is it July 4th and nobody's investing all week. Again, all of these things start to play into, into those types of raises. And I'm the guy pulling those levers behind the scenes or advising on which way we want to go.

Speaker 1 (00:31:10) - Yeah. Super interesting. So as as they go through this, probably the most valuable is where they know crowdfunding and they also know you, right? So they get crowdfunding and they also know you. Right? That's that's the that's the layups. for for people who understand you but not crowdfunding. What is a way to, to educate people? So, you know, my mom didn't know a dang thing about crowdfunding or investing or fill in the blank.

Speaker 1 (00:31:38) - What could I have done? Or for cookie right, to help cookie understand what crowdfunding is?

Speaker 2 (00:31:44) - Yeah. So a lot of these are, are platforms that require you to just log in and make an account. Right? So just imagine, you know, you got to go and actually put your email address, connect your bank account, put a credit card information in. Right. So just basically establishing establishing yourself on the platform or portal that you're going to use. Like you know which right there. Again how hard is it to get anybody to do anything in this world. That's a pretty big ask I just mentioned right there. And people just automatically assume that it's like an like it's an easy checkout process at Amazon. It's not right. So again, there's this tug and pull of this is. Commerce. Yes, but it's not Amazon e-commerce where it's a one click and I invested. No. It's like what? What does this all mean? Not only that, you know, it gets pretty scary for for people who are not investors when the language starts coming out.

Speaker 2 (00:32:35) - Right now, you and I are bebop and and scat and on words and verbiage and language that's just secondary nature. Pull my mom in and I now have to remove that assumed knowledge of, oh, she should know what a Rex is. How can she not know what it is? I talk about it all day. What? You know. So again, even when you have your friends and family that you golf with or whatever, play whatever it is, right? Your birthday dad's at your. They don't know what we're talking about. So again, it's like literally I'll give you another one of my ChatGPT bots. You put in all your emails and I say, write this as a third grader, that a third grader can understand it. So just again, taking this and going, you are letting my company grow or hey, imagine, you know and again compliance. You have to work on this. But like you invested in Jack Daniels 100 years ago. You know what I mean? Just stuff like that.

Speaker 2 (00:33:20) - Like just trying to get it to like, oh, I see what you saying. You know, imagine if we cured cancer at some point and you were at the ground floor, just these like, you know, big, bold, you know, broad statements sometimes of like, just imagine that, dream it a little bit, you know, so you're trying to find these levers and it's really, really challenging, really challenging. You know why the failure rate is so through the roof right now? Because people are just like, well, I've been working with Start Engine for a year, so everybody should know all their little nooks and crannies of how Start Engine works. Why? Why would a stranger know that what people always do that they constantly bring that to me and I'm like, man, while so.

Speaker 6 (00:34:04) - Yeah.

Speaker 1 (00:34:05) - Now, this is this is fantastic. So tell us the name of your company and for, for people out there who want to start going through this process, they go, look, we think we've got a investable business.

Speaker 1 (00:34:19) - We're marketable. We already have a crowd, you know, formed. And we want to know the best way to do this. Fuzzy, we'd like to work with you. What's a good way for people to to find you, connect with you and do a deal?

Speaker 2 (00:34:31) - Yeah. So go to the website pre-IPO hype.com top right corner. Book a call. I want everybody to get on a call with me. And you're going to spend 30, 45 minutes with me. I give everybody time because this is not a quick decision. This is not you know, and I will probably not work with you for a long time, truthfully. And but at least you've started that process because it is education based. It is an understanding. It's also making sure that you go down the right direction. You know, even if you think the things that you just mentioned that you have those things, you know, again, it's sometimes people are like, I've got to I've got 1200 people in my MailChimp. Well, that is a community, but that is not a community that's going to be successful in this.

Speaker 2 (00:35:12) - Right? So what else could we do? so that's really what it is, is I, I ultimately I need people to be very honest with me on that call. I'm not going to judge it because I've been in those positions. I'm going to go, okay, we're going to go this we're going to go that, we're going to do this. And then that's an actual plan. So that's what I recommend everybody do. And then after that, seriously follow me at TikTok. Now that one's gonna be a little bit different. It's Wenzel Wenzel with a V. So my last name but with a V and I put out 2 to 3 videos per day, all educational based around everything we just talked about. Bite sized nuggets three minutes, four minutes. Just like perfect. You know I you can see behind the scenes just today how I do cold email outreach or yesterday when I was like, you want to know how hard it is? Do Facebook ads. It is impossible to do Facebook ads right now in this space.

Speaker 2 (00:35:57) - So just I show you my campaigns and, let you kind of see what I'm working on. And then if it makes sense for you, then we will go forward. Once I scare you basically to death, I want to scare you. And then if you still want to go, then we'll talk. Yeah.

Speaker 1 (00:36:11) - Very cool. So, during this interview, there's probably a question that I should have asked, like, because I'm, you know, I'm coming into this with a little bit of knowledge, but there's probably something that I missed to ask you. What question should I have asked you?

Speaker 2 (00:36:28) - Is is crowdfunding a good thing right now just in general? Like just is it like, is it something that most people should be looking at? And the harsh answer is no, it really, really isn't. Right now. It's very, very challenging. It's incredibly saturated. the barrier to entry is higher than it ever was for almost. I would probably say most companies. It's not the right vehicle for you yet.

Speaker 2 (00:36:52) - Not ever, but just not yet. so again, there's a lot of misconceptions of people thinking that this magical cloud of cloud of cloud is going to rain money on you, and it ain't happening. It is if you got to have the marketing budget, the marketing arm, the know, you just got to have a really, really strong team. And for most companies, they just don't have that. So again, they're still fundraising in here. I just don't think most companies are really should be doing CVS right now.

Speaker 1 (00:37:22) - Wow. I've never heard like a founder saying, hey guys, this isn't this probably isn't for you. The timing is not right. Like this is really, really, really tough. So what for you know, the hundreds of companies that might go, hey, we might do that. There might be one that is actually geared for it. And as, as you look at that. As you look at that one. Right. You're sifting through, you spent your 30 minutes with 100 different people, and you're.

Speaker 1 (00:37:49) - And you found the one. What is there their main resistance from saying yes and moving forward to it so they are the right fit. They've got all the right components. It could be a huge win. What's their main resistance for doing that?

Speaker 2 (00:38:03) - Two things budget and time. What do you mean? I got to spend money on this. It's called crowdfunding. The money should just. I'm on a portal. The money should show up. Nope. You're probably going to spend 17 to 21% of. Of your raise will go to cap the cost of raising capital. Right? So just, you know, so you raise a million bucks. Do the math. Right. you're probably spending something along those lines. And then the other thing is applying your timeline to this adventure, going, I need to have this money raised by May 31st. That ain't how any of this this stuff works, man. It is just like, no, it's time. It's touch points. I appreciate that you put something on a calendar.

Speaker 2 (00:38:44) - It's just really, really challenging to go. I will make investors invest by this day. It's just not how we work as humans, right? It's just like, I'll do it when I get to it or when I'm, you know, not distracted or not thinking about all the other stuff. so yeah, those two things, you know, are the barrier to entry for most people to look at it. When I really get in the weeds and they get, they get a little nervous.

Speaker 1 (00:39:07) - So yeah pretty cool. Pre IPO hype.com is a great place to go and learn more about this. If you are one of those companies that this would work really well for. As always people in our audience, fellow dealmakers, reach out to our guests and say thank you for sharing their wisdom and their knowledge. Right? This is so awesome. Let's be a community of gratitude and just say thank you for that. As always, reach out to them. If you have a deal or a deal type or a way you do deals and you'd like to talk about it here on the show, head over to the deal scout.com, fill out a quick form and maybe get you on the show next.

Speaker 1 (00:39:39) - Till then, we will talk to you all on the next episode. Goodbye everyone.