King of Crowdfunding Howard Marks on Raising Money for Startups
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Howard Marks, pioneer in crowdfunding and founder of StartEngine, outlines his path in business and the difficulty in finding money when starting a business. StartEngine has been instrumental in helping raise millions of dollars for several early-stage startups through crowdfunding.
Prior to crowdfunding, only a few people could pass the early stages of starting a business. Friends and family would have been the prime source of financial help. Now, with the passing of the Title II (2012) and Title III (2016) of the JOBS Act, adults of any financial means are legally allowed to invest in startup businesses. Both Titles II and III of the Jumpstart Our Business Startup Act (JOBS Act) were put in place to encourage and enable funding for small businesses. Title II focuses on helping job creators get access to funds while Title III focuses on equity crowdfunding regulations.
Aside from this new investment tool, what is it that you need to focus on to be successful in raising money for your new business? Some key points according to Howard Marks’ experience in business:
– Resilience and persistence in front of the naysayers. We have heard that in the world of bodybuilders as well as in business, whatever business you are doing (starting a new company or starting a degree) requires perseverance.
– Understand the market you are going into.
– Make sure your product will be viable 3 to 5 years from the time you start your business. Have a vision in the future so that you can stay in business. Predict the future of your market.
– Have a team where your CEO is great at marketing. You need to be visible so that people can understand what they are investing in.
From here, the people who will invest in your company are the ones who truly believe in your product. More often than not those folks will be you most loyal supporters.
Up to recently, raising money for a new business was not a democratic affair. Mostly, it was people who already had ties to folks with money who could get money. In other words, women and minorities were poorly represented in entrepreneurship up to just a few decades ago. Crowdfunding is the best game-changing tool for all entrepreneurs to raise funds to start their dream businesses. Places like StartEngine are where the traditional “no” has been replaced with “yes, let’s get that money”.
Crowdfunding, also known as Online Public Offering (OPO), has been the best way for investors and entrepreneurs to grow innovative ideas. And as Mr Marks points out, one of the great things is that for an OPO to be successful the company you want to start doesn’t have to have a history. You mainly need to show a few key qualities, as pointed out above, to make sure your investors get to know you and the market you want to get into. After all, getting investors is mainly about creating a relationship of trust.
Other than that, the great news is that small businesses are not crippled by the Innovator’s Dilemma big businesses often go through. Once a business gets stuck in focusing only on what it does best and doesn’t look into how the future is being shaped by trends, failure often follows suit. So, follow your dream idea for a new business, stay nimble, adapt to your market!
For more advice and ideas from Howard Marks, follow his blog, or go on StartEngine.
You also can listen to Brian Mac Mahon (Expert Dojo) interviewing Howard to hear more on the topic of crowdfunding.