RocketHub Seeks to Add Equity-based Fundraising for Startups

imgres-2Perks-based crowdfunding is nothing new, said Brian Meece, co-founder of Rockethub.
In 1885, a fundraising effort to buy a pedestal for the Statue of Liberty raised $102,000 from more than 120,000 contributors.
Joseph Pulitzer, publisher of the New York World, ran an ad in his newspaper offering a six-inch replica of the Statue of Liberty to donors who gave a $1.
“There is a social ritual embedded here culturally,” Meece said.
A big difference is that back then, people needed to know someone like Pulitzer to reach thousands of people. Now people can use Facebook, Twitter and other social networks to reach thousands of people, Meece said.
Meece and Jed Cohen, another co-founder of Rockethub, spoke at the Crowdfund Texas Conference Tuesday morning at the Omni Hotel in downtown Austin. The topic of their presentation was “The Crowdfunding Success Pattern.”
y1jmsRockethub is a crowdfunding site that has helped countless people raise funds for projects as diverse as creating a wave-spring tennis shoe to 52 Shades of Greed, a deck of cards highlighting the fraud and other shenanigans related to the financial industry crisis.
Rockethub offers individuals the opportunity to raise money for perks-based projects. In exchange for a donation to the project, a donor can get a product or service from the person raising funds. That kind of crowdfunding is currently legal and companies like Rockethub, Kickstarter and IndieGoGo have helped people raise millions through the Internet to finance a wide variety of activities from journalism to games, books, disaster relief and even a Tesla Museum.
The other type of crowdfunding, and the subject of the Crowdfund Texas Conference, focuses on funding a startup by allowing entrepreneurs to sell small amounts of equity to many investors. The Jobs Act, passed by Congress and signed into law last April by President Obama, allows companies to raise funds from crowdfunding portals online from a wide pool of small investors. But those portals cannot begin offering deals until the U.S. Securities and Exchange Commission issues specific rules and guidelines to protect investors.
Rockethub is looking to do both perks-based and investment-based crowdfunding, Cohen said.
“We want to see if we can meld the two at Rockethub,” he said.
The company has already met with the SEC on proposed rules and Rockethub has submitted white papers to the SEC providing its suggestions on best practices for the equity-based crowdfunding portals, Cohen said.
Rockethub has also identified core patterns that reveal what drives successful projects, Meece said.
“Projects that do well are great projects that engage folks emotionally,” Meece said. “In a world of information overload, there is a shortage of emotion.”
For example, James Portnow wanted to raise $15,000 on Rockethub to build a new game. He raised it in 15 hours, Meece said. His appeal to build games that can change the world appealed to his fans and followers.
“The world noticed his product,” Meece said. “It was picked up on the front page of Reddit, which is like being on the front page of the Internet.”
The secret to success is to have an awesome project spearheaded by real people who are passionate.
The successful projects have three pillars in common: a great project, a strong network of supporters and cool goods in exchange for a financial contribution.
Artists are especially successful because they engage with their audience and they have people that follow them. People have got to tap into their social capital to succeed at crowdfunding, Meece said.
“It’s about trust and credibility,” he said.
Marc Scheff, a graphic artist, raised $25,000 on RocketHub for his project 52 Shades of Greed, a card deck with drawings depicting people responsible for the financial crisis. Scheff created a Twitter flash mob to spread the word about the project which was also featured in 25 publications including the New York Times and The Economist, Cohen said.
“The thing sort of blew up,” Cohen said.
The project got retweeted by Olivia Wilde, a Hollywood actress and activist, and Scheff was able to turn his audience into his salesforce.
Most of the people who funded his project were bankers and lawyers, Meece said.
Meece bought a pair of wave-spring Spira running shoes because he liked the idea. He’s not even a runner, he said. But the shoes, which he wore on Tuesday, are great, he said.
Dallas lawyer turned entrepreneur Andy Krafsur raised $42,000 on Rockethub to produce his Spira wave-spring running shoe. People who gave $70 got a pair of spring-powered sneakers. He was originally looking to raise $24,000.
“Spira became the eighth most Googled running shoe online,” Meece said.
Despite all the success stories, not every project makes its goal and a lot of mythology has been built up around crowdfunding, Cohen said. He likened some people’s expectations to Kevin Costner’s character in the 1989 movie “Field of Dreams” with the tag line “If you build it, they will come.” That doesn’t always happen with crowdfunding projects, Cohen said.
People need to set a reasonable financial goal, Cohen said. The average contribution on RocketHub is $75, he said.
People also need to “plan the work and then work the plan,” he said. Don’t just launch a project and let it take its course, he said. Instead, build a team, organize your contacts, prime the pump before the project launches, celebrate milestones and close strong, he said. On RocketHub, most projects take between 30 to 45 days to raise funds and the fundraising sweetspot is between $3,500 and $35,000, Cohen said.
Rockethub makes its money from fees ranging from 4 percent to 8 percent.
With crowdfunding for startups and equity, RocketHub estimates the sweetspot for fund raising to be between $20,000 and $500,000 with an average investment of $500 to $1,000.

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