Friday, 18 July 2014

Crowdfunding a Startup: A Success Story

Crowdfunding
Crowdfunding (Photo credit: Rocío Lara)

Though we just celebrated Independence Day, I’d like to take a moment to thank the thousands of people that my startup is dependent on.

Every business relies on customers to grow, but I would wager that Kuli Kuli has relied on its community more than most.

Enabled by recent changes in legislation, we might just be the first company to be financed entirely by the crowd.

This is a path that I believe will become increasingly popular, and ultimately will produce more women-owned businesses.

Women are starting companies at a rate 1.5 times higher than the national average, but male-owned businesses receive 23 times more venture capital funding. This isn’t just sexist; it’s bad business. According to a recent analysis, VC firms that invest in women-owned businesses outperform those that don’t.

Of course, few businesses approach venture capital firms at the very beginning. In the food industry, no VC will even look at you until you’ve hit a million in sales. But unless you’re independently wealthy, you will likely need to raise some money before then.

That’s where angel investors come in. As one of our investors likes to say, “infant mortality is high” at the angel stage. That’s because angels take high-risk bets on early-stage companies.

But these days, in addition to angel investors and seed funding, entrepreneurs have a new financing tool at their disposal: crowdfunding.

For Kuli Kuli, it didn’t make sense to seek investments when all we had was an idea and a few months of consumer testing data. The food market is extremely competitive. No investor would put money behind a totally unproven new superfood product founded by a bunch of twentysomethings.

But we knew we had a story. And crowds love stories. So we put together a crowdfunding campaign on Indiegogo explaining how I began working with this amazingly nutritious plant, moringa, in the Peace Corps and then started selling it in the U.S. to support women in West Africa.

At the last minute, a friend convinced us to change our goal from $20,000 to $50,000. I stayed up all night worrying we wouldn’t hit it. But we reached $24,000 in 24 hours and ended our campaign with $53,000.

In the process, we had also evangelized 800 new customers who cheered as we moved from a kitchen to a factory and eventually delivered their Kuli Kuli Moringa Superfood Bars.

Nine months later, when our bank account dipped dangerously close to zero as we struggled to keep up with demand, we again turned to the crowd. More than 200 people pitched in for a one-year, zero-interest, $5,000 loan through Kiva.

We were now in more than 50 stores across Northern California and were doing increasingly well online. But the little capital we had was tied up in manufacturing, and so we still weren’t able to pay ourselves. We’d kept our business as lean as possible but couldn’t stay that way forever.

This time we went the traditional route. I went to pitch events, stalked people on LinkedIn, and set-up countless coffee dates. (I don’t even drink coffee). I got nowhere. The combination of being young, female, and in the food industry meant that I got a lot of “that’s a cute idea.” People don’t put thousands of dollars into “cute ideas.”

And then it struck me that perhaps I was doing something wrong. I’m not terribly good at being assertive. My voice naturally goes up at the end of my sentences. I have trouble convincing investors that I’m going to make them millions because I honestly have no idea what’s going to happen in five years and I’m a bad liar. In other words, I have many characteristics associated with being a woman.

But I’m really good at building movements. So I took the few investors who’d expressed interest in us and convinced them to help us kick off a crowdfunding equity round with an amazing platform called Agfunder.

In typical crowdfunding fashion, the majority of our money came in on the first day and the last day. I finally had a ticking time bomb in the form of an all-or-nothing crowdfunding campaign to convince investors that they needed to make a decision before the deadline.

At the same time, we found out that we were a finalist in the $25,000 Ledbury Launch Fund competition. The winner was to be determined by the crowd.

The crowd came through on both fronts. In less than two weeks, we raised more than $300,000. Better yet, we now had literally thousands of people who felt like they had a stake in our company, whether they voted for us through Ledbury or invested $25,000 through Agfunder.

So I just spent the long Fourth of July weekend celebrating not just the U.S. but the incredible community that’s turned my dream into a thriving business. It is my hope that crowdfunding will enable many more entrepreneurs to realize their own version of the American dream.

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