Crowdfunding 101: Understanding the Many Forms of
Fundraising from the Masses
Elizabeth Ü Founder & ExecuAve Director, Finance for Food
Author, Raising Dough: the Complete Guide to Financing a Socially Responsible Food Business
PASA’s Farming for the Future Conference February 7, 2014 in State College, PA
www.financeforfood.com
Peer-‐to-‐Peer Lending
Inexpensive Expensive
LiRle paperwork Lots of paperwork
Do it yourself Requires professional help
Easy to manage Care and feeding over Ame
Good for introverts Takes community organizing
Quick Takes more Ame
Lower credit score OK Good credit required
www.financeforfood.com
Small dollars Millions $$$
Peer-‐to-‐Peer Lending Pla\orms
www.financeforfood.com
Peer-‐to-‐peer lending
www.financeforfood.com
Kiva Zip Trustees in PA
www.financeforfood.com
Online Fundraising Pla\orms
www.financeforfood.com
Online Crowdfunding
Inexpensive Expensive
LiRle paperwork Lots of paperwork
Do it yourself Requires professional help
Easy to manage Care and feeding over Ame
Good for introverts Takes community organizing
Quick Takes more Ame
Lower credit score OK Good credit required
www.financeforfood.com
Small dollars Millions $$$
Helpful to Have…
www.financeforfood.com
• A retail business • Lots of customers that know and love you • A mailing list / e-‐newsleRer • ConnecAons to tradiAonal media • Social media savvy + lots of followers & “likes” • Someone who can focus on campaign full Ame
Crowdfunding: 3 Different Types!
www.financeforfood.com
1. SoliciAng gigs 2. Pre-‐selling / Community Supported models 3. Selling securi'es to a large number of investors who expect a financial return
2 Crowdfunding Models
www.financeforfood.com
1. All-‐or-‐Nothing (eg, Kickstarter) – “Risk” – Less expensive – More moAvaAng
2. Keep What You Raise – Less risky – PotenAal laziness – Graveyard of sorry projects?
Crowdfunding: 3 Different Types!
www.financeforfood.com
1. SoliciAng gigs 2. Pre-‐selling / Community Supported models 3. Selling securi'es to a large number of investors who expect a financial return
Design your reward scheme
www.financeforfood.com
EnAce Backers with Rewards
www.financeforfood.com
Primal Pastures Farm’s reward scheme: • $5+ à “Thank You” • $15-‐50+ à Name on Founder’s Wall, doodads • $75+ à “Local Pack” (doodads + meat & eggs… or just the non-‐perishables)
• $110+ à Apron • $250+ à Year’s supply of chicken
Get CreaAve!
www.financeforfood.com
More Primal Pastures Farm rewards: • $350+ à Doodads + farm tour • $500+ à Doodads + Mentor Day • $1200+ à Breakfast on the Farm • $5000+ à Golden Egg: Own flock of chickens
Limited ediAon or first-‐come-‐first-‐save rewards
Gig Raising – CauAons
www.financeforfood.com
• Easier for nonprofits or groups of farmers working together
• Beware “crowdfunding faAgue” • Gig Taxes: $14k max per person per year before giver owes taxes
• Make sure you will make money!
Community Supported Models
www.financeforfood.com
Crowdfunding: 3 Different Types!
www.financeforfood.com
1. SoliciAng gigs 2. Pre-‐selling / Community Supported models 3. Selling securi'es to a large number of investors who expect a financial return
www.financeforfood.com
www.financeforfood.com
Pre-‐Selling Online –Rewards
www.financeforfood.com
• Single products • Product packs • Product line subscripAons • CSA memberships
Pre-‐Selling Online – Reward Tips
www.financeforfood.com
• Offer discounts to early backers • Consider rewards relevant to your wholesale customers
• Set appropriate pricing • Take delivery costs into consideraAon
Pre-‐Selling Online – CauAons
www.financeforfood.com
• Note your state’s laws around gig cerAficates
• Cash flow consideraAons – Stagger start dates – Offer discount on total purchase instead of straight gig cerAficates
• Make sure you will make money!
How Much Can You Raise?
www.financeforfood.com
How Much Can You Raise?
www.financeforfood.com
Asking the Public for Loans
www.financeforfood.com
Crowdfunding: 3 Different Types!
www.financeforfood.com
1. SoliciAng gigs 2. Pre-‐selling / Community Supported models 3. Selling securi'es to a large number of investors who expect a financial return
Direct Public Offerings
Inexpensive Expensive
LiRle paperwork Lots of paperwork
Do it yourself Requires professional help
Easy to manage Care and feeding over Ame
Good for introverts Takes community organizing
Quick Takes more Ame
Lower credit score OK Good credit required
www.financeforfood.com
Small dollars Millions $$$
Direct Public Offerings (DPOs)
www.financeforfood.com
• Not a form of security; it’s a way for a company to offer a security
Equity Financing
Inexpensive Expensive
LiRle paperwork Lots of paperwork
Do it yourself Requires professional help
Easy to manage Care and feeding over Ame
Good for introverts Takes community organizing
Quick Takes more Ame
Lower credit score OK Good credit required
www.financeforfood.com
Small dollars Millions $$$
Equity Financing
www.financeforfood.com
• You sell stock in your company. Investors become shareholders, and they want their money back at some point.
• …they usually also want some control over how you run the company in the meanAme.
Equity InnovaAons
www.financeforfood.com
• Non-‐voAng preferred stock
• Stock doesn’t appreciate in value as company grows
• Investors receive fixed dividend
Pop Quiz!
www.financeforfood.com
What are the 3 Different Types of Crowdfunding?
Pop Quiz!
www.financeforfood.com
What are the 3 Different Types of Crowdfunding? 1. SoliciAng gigs 2. Pre-‐selling 3. Selling securiAes
What Worked / Didn’t Work for
You?
QuesAons?
elizabeth@ financeforfood.com
415.891.9194 @foodfinance