Metro Startup Launcher
How to Find Success with Louisville Angel Investing?
Increasing the number of local angel investors has been the goal of Metro Startup Launcher from the very beginning. We've done a lot of blogs, emails, and podcasts, and now we've participated in two different types of crowdfunding campaigns. How's it going? Well, one of the companies just landed an investor/partner that has agreed to invest up to $10 million and is launching one final $300,000 local investor round.
Learn more about this final $300,000 angel round!
So what's working and what's not working?
If you look at angel investing in our area, here's what's happening:
1. Companies like Edj Analytics, MobileServe, and SentryHealth (formerly Edumedics) are raising millions of dollars in capital. They're raising capital the "classic" way, using a Regulation D 506(b) SEC exemption. Under this type of exemption, you can raise an unlimited amount of capital from accredited investors, up to 35 non-accredited investors per year, and you must only raise capital from people with whom you have an existing relationship. Generally, an accredited investor is defined as a person with an income of $200,000+ or $1,000,000 net worth (excluding the value of their home). You cannot use any form of public advertising. This method of capital raise is still very successful, IF you know the right people. You must find a lead investor to help you set up your capital raise, get all the right paperwork in place, and encourage all of their friends to invest. Typically, they shoot for $25,000+ investments from each investor.
2. One local company, Cuddle Clones (https://cuddleclones.com/), has utilized the Regulation CF exemption for equity crowdfunding. This is a newer method of crowdfunding that allows anyone, accredited investors or non-accredited investors, to invest. It is very similar to Kickstarter in that you can publicly advertise as much as you like; however, you can actually sell equity investments in your company. Investments can be very small, as little as $100 per investor, so just about anyone can afford it. You can raise a maximum of $1,070,000 per year using this exemption. To use this method, you must utilize one of the licensed online equity crowdfunding portals (such as WeFunder, StartEngine, or SeedInvest). They provide great online resources for walking you through the process and for collecting your funds. But, they're not so great at marketing the capital raise for you. You must be prepared to execute a significant marketing effort (and dollars) in order to make this work. Your capital raise also is limited to a set period of time. If you haven't completed your full raise, you're out of luck. Finally, with most of the portals, you cannot access any of your raised funds until the full capital raise has been completed. However, if you perform an amazing marketing campaign for your capital raise, this process can be very effective. Over $100 million has been raised using Regulation CF since it became legal in May 2016.
3. Finally, another local company, Blue222 (https://blue222.com/), has been successful in utilizing the Regulation D 506(c) SEC exemption. The 506(c) exemption allows a company to raise an unlimited amount of capital from an unlimited number of accredited investors only. You can publicly advertise as much as you like. The one caveat is you must prove that each investor in an accredited investor. The great thing about this exemption is that it is easy to set up, and you don't need to go through a licensed portal to collect funds. You can deposit the funds directly into your account and utilize the money immediately. In the first trial run of this method, Blue222 raised $214,000. Blue222 has intentionally chosen to raise capital in small chunks using the 506(c) exemption. Each small chunk of $200,000 to $300,000 is being sold at higher valuations.