We need $300,000 to launch ePEDALER. With that we can begin work on our electric bicycle rental franchise, including the 20-foot 'e-pod' pop-up shop; our initial 'fleet' of 16 electric bicycles and spare batteries; and the solar-powered energy bank to charge them, as well as power the e-pod lights, WiFi, air pump and security systems.
Today I got asked, 'Why don't you crowd fund it?'
Good question. Why don't we?
I have been reluctant to go down that path for a number of reasons beginning with the general philosophy behind crowdfunding organizations like Kickstarter and Indiegogo. Both were established to fund essentially a single product: a book, a concert, a documentary, a consumer product of some type. They make it very clear that they are not to be used to raise investment funds. You cannot solicit funders for, say, real estate acquisitions or a software startup. There are conventional financial mechanism and resources for those types of investments. Kickstarter and the like want to fund projects outside of the normal channels; worthy efforts that wouldn't get financed otherwise.
ePEDALER sort of straddles the chasm between these two worlds: we aren't offering to manufacture some innovative gadget or produce an iconoclastic documentary. We want to build a very cool pop-up shop, outfit it with good, solid, reliable electric bicycles and deploy it where those bikes will do the most good for the most number of people, for a fee, of course. We think we can make a reasonable profit for ourselves, our contractors, and our investors in the process.
Toward that end, we are talking with several different parties, but as with all fund-raising efforts, it's taking what seems like forever to get to the 'yes.' And the 'yes' almost always comes with strings attached, which is to be expected, of course.
Not that the Kickstarter route doesn't also have its own chains of accountability. First off, you typically have to invest some serious money up front to create a Kickstarter campaign, including a short introductory video, which depending on the production values, can be a costly undertaking in itself. Successful Kickstarter applicants recommend having some willing funders already lined up in advance who can come in at the beginning and then at the last minute to help boost you over the funding threshold. While Indiegogo awards the project however much money they earn during the campaign, Kickstarter pays out nothing if the campaign falls even a $1 short. It's all or nothing.
Next, you typically want to offer some form of compensation to your funders. Here again, Kickstarter explicitly stipulates it can't be shares or some similar reward. It needs to be something tangible: an early version of the product, tickets to the concert, a private screening of the documentary.
It's this follow-on compensation issue that has shipwrecked not a few otherwise successful crowdfunding campaigns. If you promise it, you'd better deliver it on schedule and at cost.
Still, when all's said and done, apart from meeting your obligations to your funders, the funds are essentially free of all the usual investor encumbrances. There's no one there demanding a seat or two on the board. There's no one second guessing your decisions. There's no one challenging your leadership and your vision who are able to vote you out of your own company; something that seems to happen with alarming frequency. I personally know several founders who met that fate.
Of course, venture capitalists will assure you that they have no interest in ousting the leadership of a company that's being well managed, and I can see the logic of that position, as well as appreciating that sometimes successful companies can grow beyond the founder stage, necessitating a change at C-level. That's one reason when I started ePEDALER - officially ePEDALER International, a Nebraska-recognized Limited Liability Corporation - that I assumed the titled of Interim CEO. I full expect to be replaced by someone with more business management experience and acumen as the company grows. I have, however, reserved the title of CVO - chief visionary officer. That's what it says on my business card.
Let me share something Mat Franken wrote recently in Entrepreneur.
"Let’s face it, tech startups are today’s media and investor darlings. Companies like Uber, Lyft, Airbnb, and Coin are continuing to scale and dominate headlines. Overlooked by many, though, is a crop of consumer product startups, innovating under the radar well outside the tech ecosystem, that is equally deserving of both capital and media attention."
One of those is Aunt Fannie, Franken's own startup, which he happily reports "recently closed a successful round of funding."
But that being said, he was fortunate. He points out that according to Pricewaterhouse Coopers’ and the National Venture Capital Association’s MoneyTree Report, only 4 percent of total venture capital in 2011 went to investments in consumer startups.
He lists four areas that a consumer-focused startup needs to have: a strong team, a solid brand, adaptability and performance. At ePEDALER I am working hard on number's one and two. Number three is built into the long-range business model; and number four will come once we've got that first e-pod in the field and share with thousands of vacationers the sheer delight and joy of riding an electric bicycle.
Is investing in a consumer rather than tech-based startup worth it? Writes Ryan Caldbeck, the founder of CircleUp, a consumer-focused crowdfunder, in Forbes, "Kaufmann Foundation data shows that angel investments in consumer companies produce average returns of 3.6x invested capital over 4.4 years."
Which brings me to you, kind reader. What do you think we should do? Should be continue to pursue the private investor route, or take our chances with crowdfunding? Write me at email@example.com and let me know your thoughts. And… if you'd like to see our investor slide deck, you can download it here.
Thanks for listening and, hopefully, sharing.
Posted By: Bill Moore [02-Jul-2014]
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