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Blog

Advertising for Investors – 4 Things to Know Before You Start

Mihir Gandhi

So you are ready to seek out investors. If this is your first time looking for a capital infusion from the crowd, there are a few things to know.

The Rules

The JOBS Act and SEC’s Rule 506(c) of Regulation D allow issuers – companies seeking investment capital, like you – to offer securities through “general solicitation”, including advertising, as long as a couple of key conditions are met:

  • The investors you accept money from must be accredited, and

  • You take reasonable steps to verify that your investors are accredited.

So, advertise away.

The Need vs. Readiness

A common mistake many entrepreneurs make is that they think they are ready to seek out investors, when in fact they are not. You may need to attract investment if you’re going to ______ (fill in the gap with grow/expand/survive/launch the next product/service/app), but that doesn’t mean you’re ready.

The Messages

If you embark on a campaign to attract investors before you are ready, you run the risk that your language, among other things, will trip you up. When you need investment, you may find yourself saying things like this:

  • I’ve run out of the money I had

  • I can’t/won’t invest any more of my own money

  • I haven’t found any other investors, so I’m looking to you.

On the other hand, when you have done your homework and are truly ready for investment, you’ll be saying things like this:

  • I know my customers, market and product/service and I’m ready to take my business to the next level. Now, I’m looking for a partner to help me get there.

  • I’ve looked into a variety of sources for capital, and because you seem to be the best match, I’m interested in working with you.

The Advertising

Know what kind of investor you are looking for, and what kind of an investor may be looking for you. That will help tell you where to find them. Sites like Patch of Land or Crowdfunder help bring together investors and entrepreneurs, but there are many others out there. There’s social media (a must today), newsletters, newspapers, investor magazines, and even billboards. Once your research is done, and your budget is set, you’ll be able to put together a campaign to give you the greatest opportunity for success.

 

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