Crowdfunding: ‘an old-fashioned barn-raising with modern tools’

Sharon Fisher//February 5, 2020

Crowdfunding: ‘an old-fashioned barn-raising with modern tools’

Sharon Fisher//February 5, 2020

photo of rhino hide
Rhino Hide is using crowdfunding to raise money for company expansion. Photo courtesy of Rhino Hide

You may not know someone who can invest $10,000 in your business, but you may know 100 people who can invest $100, said Kathleen Minogue, founder and CEO of Crowdfund Better, who has presented several times on the topic in Boise the past few months.

“Crowdfunding is not a little ragtag thing artists use to raise money,” she recently told attendees at the Zions Bank Business Resource Center.

Crowdfunding steps

There are several types of crowdfunding, ranging from sites such as IndieGogo to regulation crowdfunding, programs available on both the federal and state level that let companies raise money from multiple small investors without the complexity of traditional investment.

photo of kathleen minogue
Kathleen Minogue. Photo by Sharon Fisher

Companies planning to crowdfund should spend 90 days planning their campaign, such as by getting in touch with potential investors. The best way to raise money, if the majority of potential investors are in one location, could be through events, Minogue said. If they are spread out, online events may work better, she said.

Crowdfunding can overcome some of the traditional barriers in venture capital (VC) and other types of early-stage funding, Minogue said.

“When you change the funders, you change who gets funded,” she said, noting that while women receive only 2% of VC funding and 18% of Small Business Administration loans, they receive 33% of crowdfunding and are successful 67% of the time, compared with 48% of men.

Idaho crowdfunders

Several Idaho companies have already used crowdfunding to get off the ground.

Rhino Hide, which makes bulletproof wall shielding, started a campaign on StartEngine a year ago and raised $420,000, then three months ago started a second campaign that has thus far raised another $30,000, said Jason Giddings, CEO and co-founder of the Sandpoint -based company, in an email message.

photo of jason giddings
Jason Giddings

“This whole crowdfunding opportunity has given us access to money that has made a massive difference for us moving forward,” Giddings said. “It allowed us to bring legal and business development team members onboard, plus we’re currently in negotiations to bring a full-time chemist on.”

Crowdfunding does have its limitations, Giddings said.

“Advertising and the StartEngine service is costly and can be a steep learning curve, plus it’s a lot to manage since you must really put forward much of your effort to keep the investors updated,” he said. “It’s also daunting since I currently have almost 1,000 investors. This is unheard of with other types of offerings.”

Consequently, he is also setting up a more traditional investment opportunity for accredited investors for larger amounts, he said.

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Collin Rudeen

Boise Brewing has used crowdfunding several times and is working on another round, said Collin Rudeen, chief brewing officer, in an email message.

“We’re off to a good start with 66 new investors and just shy of $80,000 raised so far,” he said. “We are starting to make upgrades to our taproom with things like the addition of a can seamer (for draft beer to go in a can), replacing furniture and upgrading our sound system. I’m really hoping we can make a strong push for the rest of the year to raise enough to open a second location.”

Solar Roadways, a Sandpoint-based company developing solar-powered road surfaces that generate energy, has also used crowdfunding, said co-founder Julie Brusaw, in an email message.

“We’ve raised over $2.2 million and broke Indiegogo records, so it worked out very well for us,” she said.

Altogether, five campaigns from Idaho have raised on StartEngine for a total of over $3 million, Minogue said. Total funds raised in Idaho using Reg CF crowdfunding is $351 million for 10 campaigns from 5,300 investors, she added.

There’s more to crowdfunding than simply raising money, Minogue said. It also helps publicize a company and gain supporters who can be expected to participate in the company going forward, she said. The number of supporters may be more important than the money because it demonstrates to potential investors that you have a market, she said.