Launching A Crowdfunding Campaign 2021

DOING BUSINESS

TOOLKIT

LAUNCHING A CROWDFUNDING

CAMPAIGN In Public-Private Partnership with

Proud of our Growth.

Focused on our Future. wdcep.com • @wdcep WASHINGTON DC ECONOMIC PARTNERSHIP · 1495 F STREET NW · WASHINGTON, DC 20004 · (202) 661-8670 · WDCEP.COM

partners

about WDCEP

The WASHINGTON DC ECONOMIC PARTNERSHIP (WDCEP) is a nonprofit, public-private organization whose core purpose is to actively position, promote, and support economic development and business opportunities in the District of Columbia.

WDCEP stays one step ahead of the vibrant and evolving economic landscape by monitoring the pulse of the District’s evolution shaped by entrepreneurs, startups, investors, as well as both small and large businesses.

WDCEP’s mission is to promote the District’s economic and business opportunities through supporting business retention and attraction activities. WDCEP is the central organization in the District that connects both the public and private sectors as well as neighborhood communities to local, national, and international audiences. WDCEP’s unique position is owed to its historical knowledge of the city’s business and economic climate; accurate analytics, data, and research; and access to community partners.

WDCEP Services

WDCEP’s success aligns with its partners and the ability to facilitate dynamic relationships with technology visionaries, artists, entrepreneurs, nonprofits, and global enterprise leaders.

•

Business Engagement and Consultations

•

DC Biz Chats

•

ocal Market Intelligence L wdcep.co/neighborhoods

•

C Real Estate Search tool D search.wdcep.com

•

Site Location Assistance

Learn more at wdcep.com or engage online @WDCEP.

DOING BUSINESS TOOLKIT | LAUNCHING A CROWDFUNDING CAMPAIGN

iii

THE TOOLKIT Many start-ups and existing businesses in the District have utilized crowdfunding to launch, grow, or expand. WDCEP and its partners created this toolkit to help other interested business owners understand crowdfunding basics, including different categories and user platforms.

This publication is the result of collaboration among several District and federal agencies, community partners, and businesses, including: The Office of the Deputy Mayor for Planning and Economic Development; Washington DC Women Business Center; DC Department of Small and Local Business Development and its DC Kiva Hub; and funding platforms WeFunder, GiveButter, Patreon, and Honeycomb Credit.

DISCLAIMER The information contained in this guide is for informational purposes only. The information — including all referenced external sources, links, and downloads — has been compiled from a number of resources and is provided in good faith to support businesses. WDCEP makes no representation

iv

©2021 WASHINGTON DC ECONOMIC PARTNERSHIP

or warranty of any kind regarding the accuracy, reliability, availability, or comprehensiveness of the information contained in this guide. Your use of this document implies acceptance of these Terms of Use and acknowledgment of the Disclaimer below.

This document contains names of third parties and links to third-party websites or content belonging to or originating from third parties.

The third-party site owners, and not WDCEP, own the intellectual property rights to the materials for any and all linked sites. Such links are for user convenience and informational purposes only; WDCEP does not recommend or endorse the contents of the third-party sites.

WDCEP does not assume responsibility for the accuracy or reliability of any information offered by third-party websites linked in this guide. Please consult appropriate professionals before taking any action based on information contained herein. Use of, and access to, this guide or any resources contained herein does not create any type of relationship between the user and WDCEP or any of its agents. All liability with respect to any user’s reliance on this guide is hereby expressly disclaimed.

contents 01 CROWDFUNDING 3 02 L AUNCHING A CROWDFUNDING CAMPAIGN

5

03 CROWDFUNDING TYPES

9

04 CROWDFUNDING RESOURCES

21

Your essential resource to start, grow, or expand your business in the District.

Explore at wdcep.co/dbg.

WASHINGTON DC ECONOMIC PARTNERSHIP · 1495 F STREET NW · WASHINGTON, DC 20004 · (202) 661-8670 · WDCEP.COM

crowdfunding

Crowdfunding harnesses the

may be used to raise money

power of social networking

for financial emergencies,

through online platforms

creative projects, ongoing

where community members

business activities, or new

(individuals and organizations)

enterprises. Entrepreneurs use

can make financial

crowdfunding as an alternative

contributions to support

to traditional business

individuals, organizations, or

credit or to supplement

businesses. Crowdfunding

existing financing sources.

DOING BUSINESS TOOLKIT | LAUNCHING A CROWDFUNDING CAMPAIGN

3

Crowdfunding benefits businesses of all types and at all stages of growth, from solo entrepreneurs to Fortune 500 companies, and often offers fewer barriers to entry than

BENEFITS • Available to all business types at all stages • Does not generally require credit or collateral • Increases diversity of investment sources • Promotes marketing opportunities through media exposure and support from investors as brand ambassadors • Provides an opportunity to validate a business idea (i.e. proof of concept) or scale up an existing enterprise • Less restrictive with fundraising limits

4

©2021 WASHINGTON DC ECONOMIC PARTNERSHIP

other traditional financing sources. Before launching a fundraising campaign, a business should understand the benefits and challenges of crowdfunding as outlined below.

CHALLENGES • Risk of losing intellectual property • May require relinquishing partial company ownership (in the case of equity/investment crowdfunding) • Often involves expensive platform fees and time-consuming marketing campaigns • Presents initial hurdles in terms of building interest, earning trust, and exposing a person and/or firm to scrutiny and potential rejection • No guarantee of meeting funding goals

launching a crowdfunding campaign The following best practices are strongly recommended for businesses ahead of initiating a successful crowdfunding campaign:

STEP 1: PRE-LAUNCH 1. Perform due diligence and learn the necessary steps to run a campaign.

Businesses should research elements of successful campaigns before taking on one themselves.

2. Propose innovative ideas and/or scalable products. The proposal must stand out to be noticed by potential contributors, especially in the case of equity crowdfunding, since investors are also looking for return on investment.

3. Identify the target audience. Identify the types and preferences of consumers who may likely support a marketing campaign and eventually purchase the product.

DOING BUSINESS TOOLKIT | LAUNCHING A CROWDFUNDING CAMPAIGN

5

4. Review and test the product(s). Soliciting feedback from potential consumers is essential for testing and making changes to a product prior to kickstarting a broader marketing campaign.

5. Know the rules and regulations associated with each crowdfunding platform. Regulations often govern allowable fundraising amounts, as well as associated compliances and benefits.

6. Expand one’s social media presence. Initial investors are likely to be part of one’s personal and professional network, including friends, family members, coworkers, acquaintances, and inaugural or existing customers, so one should establish a robust list of contacts willing to support the initiative financially.

7. Set financial goals. Anticipating business expenses, particularly unexpected ones,

CROWDFUNDING TYPE

6

is vital for determining the necessary amount of capital to raise.

8. Develop a robust marketing strategy. Tailor marketing initiatives to target audiences with personalized messaging, high-quality materials, and captivating content.

9. Prepare financial documents.

Crowdfunding platforms may or may not require proof of concept or business plans.

10. Enlist professional marketing expertise.

Budgeting for established experts to conduct outreach and market analysis may save time and money.

Certain nonprofit service providers may also provide free assistance.

11. Select the preferred crowdfunding platform(s). Below is a brief overview of the various categories of crowdfunding:

DESCRIPTION

Donation-based

Involves sourcing funds by asking individuals to donate small monetary contributions in support of a cause. Donation-based platforms do not require rewards or tokens of appreciation in return for donations, although thank-you notes and updates are recommended.

Rewards-based

Involves collecting donations in return for perks, services, or exclusive content. Rewards-based crowdfunding allows entrepreneurs to solicit small contributions and pre-sell products on a wider scale. Token or reward amounts may be tiered to encourage higher investments.

Membershipbased

Enables entrepreneurs to gain patrons or members who receive access to exclusive content, often at various tiers. This system offers a sustainable method for artists, writers, or thought leaders to receive monetary support over time.

Loan-based

Often referred to as debt crowdfunding, allows entrepreneurs to raise funds in the form of small business loans. Unlike donations, loans necessitate repayment. Loan terms, fees, and restrictions vary across platforms based on business type and use of funds.

Equity-based

Allows entrepreneurs to raise investment by providing equity stakes in the company. Campaign backers become investors, while the entrepreneur or enterprise retains full control. Unlike traditional venture capital arrangements, business owners can set their own investment terms. Equity crowdfunding is best suited for companies whose viable product or service has existing momentum.

©2021 WASHINGTON DC ECONOMIC PARTNERSHIP

STEP 2: LAUNCH

STEP 3: POST-LAUNCH

1. Choose a crowdfunding platform. Fundraising needs will ultimately determine the selected platform, as each has different rules regarding the time period and manner for withdrawing raised funds. Payment processing fees and structures also vary by platform.

2. Determine the type(s) of rewards or amount of interest to offer (applies to Rewards& Membership-based). A good rule of thumb, and a requirement for Rewardsbased crowdfunding platforms, is to offer some perk or incentive to contributors.

Similarly, equity-based crowdfunding dictates that investors receive equity.

3. Create a campaign page. The campaign page should define the “ask,” including the amount and purpose of funds requested, and include an engaging online pitch that describes the business and its anticipated community impact. Successful pages incorporate short (2-4 minute) compelling videos, high-quality images, links to websites and social media handles, contact information, and contribution methods.

4. Promote the campaign. Decide on the most appropriate marketing channels to reach the target audience. Utilize video advertising on various social sites. Contact social media influencers and media outlets to amplify the campaign. Ask advocacy organizations, local Main Streets, trade or business associations, and neighborhood civic groups to promote fundraising efforts.

1. Apprise financial contributors. Request email addresses and share progress. Remain transparent and keep backers engaged.

Afterward, alert funders of future campaigns.

2. Fulfill promises. Upon reaching campaign funding goals, one must deliver on any promises, including providing perks and/or rewards to contributors. Certain platforms also take a percentage of funds raised as a platform fee. Campaigns that fail to reach fundraising goals may resort to other funding options or decide to relaunch.

3. Thank contributors. Thank-you notes may encourage contributors to share a campaign with their network and contribute to future efforts.

4. Solicit feedback. Incorporate recommendations to adjust products and marketing accordingly.

5. Begin manufacturing. Identify a manufacturer and keep contributors abreast of product timing, as they will be looking forward to seeing the vision come to fruition.

DOING BUSINESS TOOLKIT | LAUNCHING A CROWDFUNDING CAMPAIGN

7

COMMON MISTAKES: A campaign may ultimately prove unsuccessful due to: Setting unrealistic goals.

While tempting, setting funding goals too high puts the enterprise at risk of missing its target goals and may jeopardize receipt of funds, as some platforms return financial pledges to backers in the event of an unsuccessful campaign.

Running concurrent campaigns.

Dividing one’s time and resources among more than one campaign is likely to undermine the quality and success of each, particularly because potential investors may question the need to contribute to multiple causes.

Running a campaign on multiple crowdfunding platforms.

While allowed, using more than one platform at one time may impact a campaign’s credibility and appear questionable to potential backers, in addition to costing time, money, and resources.

Conducting insufficient outreach.

Overreliance on personal and professional connections may hurt one’s ability to achieve funding goals. Successful campaigns conduct outreach to different organizations, groups, social media platforms, and news outlets to spread the word.

8

©2021 WASHINGTON DC ECONOMIC PARTNERSHIP

Maintaining a limited social media presence.

Today, having a strong social media presence is pivotal. Increasing one’s activity and budgeting for advertisements on these platforms will increase a campaign’s exposure and likely increase its chance of success.

Formulating a lackluster business pitch.

A pitch that is lengthy, unengaging, disorganized, or vague is a recipe for failure.

Investing in low-quality marketing materials and media.

No matter how innovative an idea or product might be, the marketing behind it must grab potential backers’ attention while conveying serious commitment and garnering credibility.

Offering unattractive rewards.

Unappealing reward offerings may hurt potential interest in contributing to a campaign.

Neglecting to thank supporters.

Whether or not the campaign is successful, expressing gratitude to supporters may encourage future participation.

crowdfunding types As highlighted on page 22,

venture’s business needs

multiple crowdfunding

and development stage.

categories exist and may

The following section

or may not make sense

provides further detail

to pursue depending on a

about each type.

DOING BUSINESS TOOLKIT | LAUNCHING A CROWDFUNDING CAMPAIGN

9

DONATION-BASED CROWDFUNDING Donation-based crowdfunding is well-suited for projects or programs that will provide social or economic benefits to one or more communities.

An example of this longstanding practice is the work of Heifer International, which has funded the distribution of animals to women and families in need using many small contributions from supporters. Donation-based crowdfunding is designed to connect the beneficiaries, donors, and organizations to resources to which they might not otherwise have access to.

BEST FOR: supporting a personal or social cause, including individuals experiencing adversity, organizations facing particular hurdles, or communities hoping to achieve shared goals by combining resources.

BEFORE THE CAMPAIGN: make sure that your community is eager to contribute money to the cause. A strong video, compelling social media campaign, or a very clear need are all really important to make sure your community is on board.

RELEVANT PLATFORMS: The best-known platform of this type, GoFundMe, offers periodic matching grants for campaign donations. The site does not charge usage fees but does charge credit card processing fees, along with accepting donations for its operations.

10

©2021 WASHINGTON DC ECONOMIC PARTNERSHIP

GIVEBUTTER was founded in 2016 in a Washington, DC college dorm as one of the first crowdfunding platforms geared specifically towards students. Today, Givebutter offers a full suite of online fundraising technologies for payments, campaigns, and events of all kinds. The platform has powered more than $100 million in annual donations for over 35,000 organizations and causes.

•

Platform fees: Users enjoy features without platform fees other than a payment processing fee of 2.9% and a $0.30 transaction fee, which Givebutter donors can choose to cover (95% do).

•

Users may use the platform to sell tickets for and manage events, from livestream campaigns to international walk-a-thons.

•

Givebutter’s all-in-one platform serves all payment processing and data tracking needs with respect to general donations, dues, campaigns, peer-to-peer fundraising events, and more.

DC SUCCESS STORIES •

In 2020, GetUsPPE raised $87,000 to sustain PPE distribution and supplies for healthcare professionals. As of date, they have delivered upwards of 2.1million PPE units.

•

RASA, a DC-based Indian restaurant was able to raise $12,500 in less than 24 hours to provide 5000 meals to health workers and school children. To date, they have collectively raised $72,000 from 152 supporters.

•

During the height of the COVID pandemic, many District organizations utilized donationbased crowdfunding to compensate staff and cover rent and other expenses while their spaces remained closed. Campaigns included the Pizzeria Paradiso Family Relief Fund for temporarily unemployed staff and Keep the Brown Beauty Co-Op Open.

REWARDS-BASED CROWDFUNDING Rewards-based crowdfunding is ideal for products or services requiring upfront capital.

Examples include raising funds to host an event or purchasing equipment to manufacture a new item. Donors might receive early access to or reduced retail prices for an item, tickets to an event, or limited-edition collectibles. While donors will not expect monetary reimbursement as part of this structure, they will likely expect to receive something (however small) and may be eligible for different tiers of perks depending on the size of the donation. A business could also carry out an independent rewards-based crowdfunding campaign, although utilizing a platform is advisable.

BEST FOR: Projects involving a specific product or service, ideally one from which contributors may benefit.

BEFORE THE CAMPAIGN: Generate excitement for the product or event by executing a thoughtful plan. Request guidance from local service providers or hire a marketing consultant.

RELEVANT PLATFORMS: numerous, and the following are recommended: •

Indiegogo is designed for creative campaigns, such as arts, new products, events, and music. It allows campaigners to choose between flexible and fixed funding structures. With flexible funding, campaigners may accept any amount that will support their cause, while fixed funding permits campaigners to keep funds only if the goal is met. The latter generates more pressure but exacts lower fees. o Platform fees: Indiegogo charges a 5% platform fee on all campaign funds. The processing fee vary based on location and currency.

DOING BUSINESS TOOLKIT | LAUNCHING A CROWDFUNDING CAMPAIGN

11

•

Kickstarter leans towards rewards-based crowdfunding. Similar to Indiegogo, it is intended for creative projects of all sorts. However, its fixed funding only allow for the release of funds after a campaign has reached it goals. o Platform fees: Kickstarter charges 5% in platform fees upon completing a successful campaign. The processing fee ranges between 3% to 5% plus anywhere between $0.05 to $0.20 per pledge.

IFUNDWOMEN allows campaigns to incorporate reward tiers while also offering a donation-only option.

The crowdfunding platform supports female entrepreneurs and offers free coaching and professional video services, in addition to flexible options for funding, rewards, and goals that may be updated throughout the campaign. Additional resources include an e-course, the iFundWomen Method Playbook, and weekly webinars.

•

•

12

Platform fees: IFundWomen charges 5% per transaction.

The platform uses Stripe and PayPal to process payments.

Both charge 2.9% + $0.30 per transaction. Discounts are also available for eligible charities.

20% of the revenue IFundWomen collects from standard fees are reinvested into live campaigns.

©2021 WASHINGTON DC ECONOMIC PARTNERSHIP

DC SUCCESS STORIES •

Ipade harnessed iFundWomen to raise over $40,000, including a $25,000 grant from American Express. Perks included journals, stickers, Instagram shout-outs, 90-minute consultations, and 30-minute meet-and-greets, as well as long-term membership in Ipade.

•

In 2016, Monica Jahan Bose and Nandita Ahmed raised $11,000 for Her Words: Storytelling with Saris, an exhibit and film screening in DC, and have since continued the project.

•

Tory Brown and Fort Circle raised $29,000 for Votes for Women, a tabletop board game covering the American Women’s Suffrage movement.

•

Kanchan Singh used Kickstarter to collect more than $35,000 for Crumbs and Whiskers, a cat café. Donors received fun and cheeky rewards, and Kanchan increased adoptions of shelter pets. After establishing the DC space, Kanchan launched the café concept in other cities as well.

TIP: Rewards should not cut into revenue for the business. For example, printing and mailing cards for $3 would diminish returns from a $5 donation. That said, generating momentum at the beginning of a campaign could initially require rewarding products at close to cost.

MEMBERSHIP-BASED CROWDFUNDING Membership-based crowdfunding is a longstanding model used for many different products and services, from Community Supported Agriculture operations whose members receive weekly seasonal crops to learning resources and subscriptions. Online crowdfunding simply increases one’s reach to enlist prospective members, who may pay at specific time intervals or purchase an annual membership upfront.

BEST FOR: Creative projects that produce frequent or regularly scheduled (e.g., monthly, seasonal content.

RELEVANT PLATFORMS: PODIA allows entrepreneurs to provide memberships, online courses, downloads, webinars, and subscriptions to their customer base. o Platform fees: Podia offers 3 plans (More, Shaker, and Earthquake) ranging from $39 to $179 per month. All plans include unlimited customers, online courses, downloads, and email marketing. The platform uses Stripe and PayPal, both of which charge a standard transaction fee of 2.9% + $0.30 per transaction.

•

SKILLSHARE is a learning platform for creatives and professionals to teach their skills. o Platform fees: Skill Share’s annual membership cost is $13.99 per month (billed annually at $168) or $32 per month. Teachers earn royalties for every minute watched and through referrals.

Skillshare also provides a free month subscription, team membership plans, membership perks, and a Teacher Handbook to get you started.

PATREON is a monthly membership platform that helps more than 200,000 creative entrepreneurs and small businesses earn predictable and sustainable revenues and connect with supporters online. Patreon offers members-only newsletters, live-streamed workshops, classes with experts, in-person events, discounts, and merchandise.

BEFORE THE CAMPAIGN: Establish a clear product, concept, and determine member benefits for long-term contributions.

•

•

TEACHABLE provides online coaching services and e-learning courses, including marketing, tutoring, watercolor painting, and 3D Design.

•

Platform fees: Patreon charges a platform fee, processing fee, payout fees, and 2.5% currency conversion fees. Specific percentages and numbers can be accessed here.

•

Patreon also offers several resources specifically for small businesses, with topics including getting started; choosing a business model; and operating during the Covid pandemic.

o Platform fees: Teachable offers 3 plans starting at $29 per month. All plans include unlimited courses, basic quizzes, lecture comments, and student management.

DOING BUSINESS TOOLKIT | LAUNCHING A CROWDFUNDING CAMPAIGN

13

DC SUCCESS STORIES: •

PoPville, a blog by native Washingtonian Dan Silverman that chronicles the District, offers five Patreon membership levels priced from $2 to $100. Currently, 948 patrons contribute to support the outlet’s long-term sustainability.

•

Current Movements is a grassroot movement that connects activists, organizations, and movements through film, art, and technology. It currently has a membership of 43 patreons which contributes to its monthly membership fees.

•

Barred in DC is a nightlife social site that focuses on liquor licensing and other DC bar news. The membership ranges from $1 to $5 a month. Barred in DC currently has a membership of 18 patreons.

This women-owned business managed fundraising campaigns utilizing both donationand rewards-based crowdfunding: •

Three Part Harmony Farm used a flexible funding model through Indiegogo that allowed the enterprise to raise over $10,000, despite missing its $50,000 goal.

Contributions of up to $5 were considered donations, while higher amounts yielded perks ranging from note cards to company swag to a romantic dinner at the farm.

LOAN-BASED CROWDFUNDING Loan-based crowdfunding mirrors traditional loans by requiring a business to repay borrowings over an established period, at a specified interest rate.

Crowdfunding permits contributions from friends, family, members of the public, and other individual investors in addition to financial institutions. In addition, financial institutions may provide matching funds for investments by individuals. Examples such institutions include the Local Initiatives Support Corporation (LISC) and Bank of America.

BEST FOR: any project, especially those for which traditional sources might not be as willing to lend financing due to factors such as: •

Early business stage

•

Perceived industry “risk”

•

Poor credit score or lack of collateral

BEFORE THE CAMPAIGN: Have a clear plan, including the anticipated amount to raise, and research platform interest rates which may differ from traditional bank loans.

Depending on the platform, campaigns that miss targets may or may not receive funds.

RELEVANT PLATFORMS: KIVA is a nonprofit organization established in 2005 to help unbanked entrepreneurs and businesses access financial services and other supports. The platform connects with 1.7+ million individual and organizational investors.

•

14

©2021 WASHINGTON DC ECONOMIC PARTNERSHIP

Platform fees: Kiva offers $1000 to $15,000 loans to businesses and entrepreneurs at 0% interest, $0 fees, and a repayment timeframe of anywhere from 12 to 36 months.

•

•

The platform offers an application processing time of less than 2 weeks, and a fast loan payment between 2 to 7 days. It welcomes all business in most industries. Applicants with low credit score, past bankruptcies and justice-exposure may also apply.

Kiva allow for access to government agencies through partnerships like the DC Kiva Hub, which connects businesses with the DC Department of Small and Local Business Development (DSLBD) to expedite loan application review, help businesses apply for and repay loans, and encourage the creation of matching fund pools. Additionally, it helps make introductions to trustees, organizations that provide guidance and endorse borrowers.

HONEYCOMB CREDIT is a loanbased crowdfunding platform that facilitates direct borrowing of $15,000 to $500,000 by small businesses from individual investors. Honeycomb caters to businesses with a large consumer base, and representative clients include restaurants, breweries, grocery stores, craft food makers, and local retailers.

Businesses are invited to join the platform upon passing Honeycomb’s credit analysis and subsequently receive access to free crowdfunding specialists.

•

Platform fees: Honeycomb charges $250 for a campaign launch; a 6%–8% commission once a business reaches its minimum goal; and a 2.85% investor fee capped at $37.25 per investor.

•

Interest rates: Honeycomb’s interest rates range from 5% to 12%, with all repaid principal and interest returned to investors.

DC SUCCESS STORIES •

8Myles, a manufacturer of gourmet mac and cheese that works out of Union Kitchen, ran a Kiva campaign at the start of the business.

After contracting with Whole Foods and other larger retailers, 8Myles required additional capital to meet larger purchase orders and support sales and marketing efforts. The company proceeded to launch a Honeycomb campaign with an 8.75% interest rate that raised $36,200 from 53 community investors.

•

The Village Café used Kiva to raise $10,000 from 99 investors for its initial purchase of coffee beans, food ingredients, and other inventory.

•

Haute and Polished Designs LLC raised $15,000 from 190 lenders to scale her interior design business to next level.

•

Pratt Standard, while known as True Syrup & Garnishes, used Kiva to raise $10,000 from 162 investors for product development, including the purchase of a labeling machine.

•

LoveVi_Only raised $8,500 from 127 lenders for back office support, branding and inventory for her startup business.

•

Blanca and Judith both secured loans to renovate and purchase inventory for their hair salons thanks to KIVA City D.C., a local partnership among Kiva, Capital One Bank, and the Latino Economic Development Center.

DOING BUSINESS TOOLKIT | LAUNCHING A CROWDFUNDING CAMPAIGN

15

Accessible, Affordable Capital for DC Businesses

https://dslbd.dc.gov/DCKivaHub dc@local.kiva.org

No interest. No fees. No revenue. No credit. No collateral. No brainer.

Kiva US has partnered with the DC Department of Small and Local Business Development (DSLBD)’s to create the DC Kiva Hub @ DSLBD through which DC-based business, and DC residents exploring entrepreneurship can access 0% interest, $0 fee loans crowdsourced from $1000 to $15,000 through family, friends and DC community and beyond.

No barrier financing.

Borrowers often shut out of traditional bank financing are welcome and encouraged to apply including but not limited to:  Start-up businesses  No/low revenue or low credit score  Former bankruptcy status  Entrepreneurs of color, all abilities, all immigration status, all ages over 18, all gender identities, and justice exposed

All Stages. From DC residents exploring a new business

New business Sosab used her Kiva loan to add first employee

idea to experienced business owners seeking to scale.

Fast processing. Less than 60 days from submission

of a complete, eligible application and to deposit of loan funds in business’ bank account. Average time is 15 days for DC Kiva Hub @ DSLBD borrowers.

Broad use of funds.

Kiva loans funds can be used for most business expenses including:  DC Incorporation fees  DC Business licensing fee  Space buildout and Rent  Payroll and more!!

O Earth Creamery and Bakery launched her campaign on Monday, had funds in bank by Friday so she could vend on Sunday.

Creates Community.

Beyond funding, Kiva depends a business’ engagement in the larger DC community and often expands their customer pool as their Kiva campaign exposes them to a larger audience supportive of local and small businesses.

Extensive guidance.

Through the DC Hub, DCbased applicants and borrowers receive wrap-around support from DSLBD and Kiva Trustee partners from their initial exploration of Kiva, through loan application, crowdfunding campaign and loan repayment.

Free language interpretation is available.

(202) 727‐3900 Inno.ED@dc.gov

ነጻ ትርጉም ይገኛል. La interpretación gratuita a otros idiomas está disponible.

我们提供免费的翻译服务。 Une interprétation linguistique gratuite est disponible. 무료통역 서비스를 제공합니다. Ukalimani wa lugha bila malipo unapatikana. Có thông dịch miễn phí. ‫ﻟﺗﺭﺟﻣﺔ ﺍﻟﻠﻐﻭﻳﺔ ﻣﺗﻭﻓﺭﺓ ﻣﺟﺎﻧﺎ‬.

Griffin LLC’s Kiva campaign connected her to wider community offering loan funds, in-kind support and leads on B2B opportunities.

EQUITY-BASED CROWDFUNDING

REGULATIONS

Equity-based crowdfunding helps raise large amounts of capital for both start-ups and existing businesses. The process is similar to that of angel or venture capital investment in that investors obtain some form of business ownership, usually in the form of equity, in exchange for financial support. Whereas traditional investment vehicles may require accredited investors to maintain a base net worth of $200,000 for two consecutive years, equity crowdfunding offers smaller, nonaccredited investors the opportunity to contribute.

Equity crowdfunding is subject to federal and state securities rules, and one must be aware of certain legal implications before raising funds.

First, determine the appropriate regulation, as each comes with varied costs, benefits, and compliances: •

Regulation Crowdfunding or Title III permits crowdfunding up to $1,070,000 with $5 million during a 12-month period from accredited and non-accredited investors.

•

Regulation A+, which falls under Title IV of the Jobs Act, includes two types of offerings. Tier 1 permits raising up to $20 million annually, while Tier 2 allows up to $75 million annually from both accredited and non-accredited investors.

•

Regulation D, comprised of Rules 506(b) and 506(c), permits a business to raise unlimited funds from accredited investors only.

BEST USED FOR: Obtaining large amounts of capital to start or expand a company. To determine whether to pursue equity crowdfunding, one should answer “yes” to the following questions: •

Do you have a robust personal and professional network of potential investors?

•

Do you have a strong marketing strategy and a product that is unique and scalable?

•

Do you anticipate high investment returns for your business?

BEFORE THE CAMPAIGN: Determine the amount of equity you would be willing to exchange for investment funds.

DC SECURITIES OFFERINGS EXEMPTION Businesses and startups operating in DC may qualify for a DC security offering exemption, which would preclude District securities registration requirements. More information is available at DC-only securities offering.

DOING BUSINESS TOOLKIT | LAUNCHING A CROWDFUNDING CAMPAIGN

17

RELEVANT PLATFORMS •

business resources and services.

There are no transaction fees.

SeedInvest, used primarily by tech and cannabis-related companies.

•

o Platform fees: It charges a 7.5% fee on total investment and 5% warranty coverage on the amount raised, in addition to $10,000 on additional expenses. The transaction processing fee include a 2% non-refundable fee, up to $300.

•

o Platform fees: It requires a monthly fee of $299 and does not charge a fee based on earnings. o Crowdfunder allows for investment solicitation from accredited investors only.

AngelList welcomes all types of companies.

• o Platform fees: It does not charge a platform fee but may impose costs on equity deals.

•

EquityNet, which caters to all companies and particularly high-growth and tech companies. o Platform fees: It requires a onetime subscription fee ranging from $900 to $25,000 for access to

Crowdfunder, used by tech and finance companies at various stages of growth.

MicroVentures, which caters to businesses with unique products. o Platform fees: It requires a platform fee of $99, a due diligence fee of $250, and a commission of 5% on total earnings. o Businesses that fail to meet investment goals by the deadline will have all investment funds returned to investors.

DOING BUSINESS TOOLKIT | LAUNCHING A CROWDFUNDING CAMPAIGN

19

DC SUCCESS STORIES WEFUNDER, an investment crowdfunding PBC and B-Corp, allows startups to raise $50,000 to $5 million in capital from both accredited and non-accredited investors. It is a great fit for tech firms and for breweries, coffee shops, film productions, and other enterprises with fully functioning product or service lines.

•

20

Platform fees: The minimum investment amount is $100, including a 7.5% fee of the total raised. The platform waives fees for total investments of at least $25,000.

•

Crowdfunding campaigns occupy only one line on a capitalization table, and Wefunder requires no upfront costs or equity.

•

To get started, a business must create a profile and connect with a Wefunder fundraising manager.

©2021 WASHINGTON DC ECONOMIC PARTNERSHIP

•

Caryrx, an on-demand pharmacy with free same-day delivery, used Wefunder to raise over $150,000 from 186 investors.

•

Pharm MD, a virtual health platform that provides telehealth services to patients, has raised over $192,000 to prevent adverse drug reactions.

•

Reyets, a social justice network that seeks to address emerging and existing issues in society, has raised over $65,000 from 82 investors to date.

•

After True Syrup & Garnishes rebranded as Pratt Standard, the company launched a Wefunder campaign and raised more than $91,000 from 85 investors to expand its craft cocktail syrup operations.

crowdfunding resources There are a wide variety of

stage, cause, and operation

platforms that cater to different

budget. The following section

types of businesses looking to

provides an array of popular

start a crowdfunding campaign.

platforms which best serve

Choosing the right platform

startup, established businesses,

depends on a variety of reasons

non-profits organizations,

not limited to business needs,

and creative projects.

DOING BUSINESS TOOLKIT | LAUNCHING A CROWDFUNDING CAMPAIGN

21

CROWDFUNDING PLATFORMS Recommended for non-profit organizations:

Best for-profit startups and established business at all stages: Donation or Rewards-based platforms: f Fundable

f InKind (restaurants)

f Deposit a Gift

f FundRazr

f GiveButter

f DoJiggy

f GivingMail

f GoFundMe

f Donate Kindly

f Handbid

f IFundWomen

f Donors Choose

f MightyCause

f Double to Donation

f PlumFund

f AngelList

f Lending Club

f StartSomeGood

f Chuffed

f Microventures

f Crowdcube

f Prosper

f Crowdfunder

f SeedInvest

f EquityNet

f StartEngine

f Funding Circle

f Upstart

f Honeycomb Credit

f Wefunder

f FirstGiving f Fundly

f Pozible f RocketHub

Debt or Equity-based platforms:

f Kiva Creative projects: f ArtistShare

f Seed&Spark

f Indiegogo

f Ulule

f Kickstarter

f WeMakeIt

f Patreon

22

©2021 WASHINGTON DC ECONOMIC PARTNERSHIP

Honeycomb Credit Crowdfunding Cohort

Honeycomb Credit unlocks fair capital for small businesses from an unexpected source: their customers, fans, and friends. By crowdfunding a small business loan up to $500,000, entrepreneurs can grow their business while building deep community roots. Keeping interest payments in their own neighborhood, and not on the bottom line of some bank helps to build the vibrant, financially empowered communities of tomorrow.

NEW LOCATIONS

RENOVATIONS

EQUIPMENT

R&D

FOOD TRUCKS

?

WORKING CAPITAL

REFINANCING

MARKETING

HIRING

AND MORE!

“Honeycomb Credit enabled us to essentially time travel forward on our five-year business plan.”

Tom, Owner, Abjuration Brewing

$15,000500,000+ crowdfunded raise

5.012.0%

30-60 months

interest rate

term length

BUSINESS SUPPORT ORGANIZATIONS The following organizations offer technical assistance and resources to businesses looking to kickstart crowdfunding campaigns:

WASHINGTON DC ECONOMIC PARTNERSHIP (WDCEP) WDCEP, a 501(c)3 organization, promotes business opportunities and contributes to business retention and attraction activities throughout the District of Columbia. WDCEP supports businesses and entrepreneurs looking to open, expand, or invest in DC through programs and services focusing on business development and opportunities, as well as intelligence about the real estate market.

DC DEPARTMENT OF SMALL AND LOCAL BUSINESS DEVELOPMENT (DSLBD) DSLBD supports the growth and retention of District businesses and promotes economic development along the District's commercial corridors. The agency manages the DC Kiva Hub, powered by Kiva, for crowdfunding loans.

DC SMALL BUSINESS DEVELOPMENT CENTER (DCSBDC) DCSBDC's network provides no-cost, confidential one-on-one business counseling, specialized training, and technical assistance to District businesses at all phases of development.

WASHINGTON, DC WOMEN’S BUSINESS CENTER (DCWBC) DCWBC serves women-owned businesses and female entrepreneurs with training and consulting to assist with business growth.

24

©2021 WASHINGTON DC ECONOMIC PARTNERSHIP

U.S. SMALL BUSINESS ADMINISTRATION (SBA)

GREATER WASHINGTON BLACK CHAMBER OF COMMERCE (GWBCC)

The SBA is the only cabinet-level federal agency fully dedicated to small businesses, provides counseling, capital, and contracting expertise to and serves as a voice for small businesses.

GWBCC combines the power of a resourced, national network with local expertise and connections. The GWBCC is committed to promoting black business growth in DC by providing resources through advocacy, education, and facilitation of networking opportunities.

LATINO ECONOMIC DEVELOPMENT CORPORATION (LEDC) LEDC equips aspiring and established entrepreneurs with the skills and tools necessary to run and strengthen a small business. LEDC offers training and coaching sessions in Spanish.

GREATER WASHINGTON HISPANIC CHAMBER OF COMMERCE (GWHCC) GWHCC is a membership-driven organization that supports the economic development of the metropolitan region by facilitating the success of Latino- and other minority-owned businesses and the communities they serve through networking, advocacy, education, and access to capital.

DC CHAMBER OF COMMERCE (DCCC) DCCC strives to create a vibrant, thriving economy that improves quality of life for all in the District by establishing mutually beneficial partnerships among business, government, and the community.

ANACOSTIA ECONOMIC DEVELOPMENT CORPORATION (AEDC) AEDC's Small Business Development Center provides free management, technical assistance, and training to DC residents and small businesses at all phases of business development.

DOING BUSINESS TOOLKIT | LAUNCHING A CROWDFUNDING CAMPAIGN

25

DCWBC Assistance Delivery Methods Tools, Capital, Knowledge, and Networks Tools • LivePlan: Writing a Business Plan ​

√ One-on-One Counseling √ Webinars √ Training Courses √ Peer to Peer Exchanges √ Website

Knowledge • ​How to Start a Business • ​Budgeting and Financing

• G rowthWheel: Business Decision Making

• ​E-commerce​ • Government Contracting

Capital • Referrals to Funding Sources

• Marketing and Sales • & more

• A ssistance with loan and/or grant applications

Networks • Peer to Peer events​ • Resource providers • ​Advisors​ • Mentors

DC Kiva Hub offers DC businesses and DC resident entrepreneurs no-barrier, favorable term crowdfunding loans to help them open, operate, pivot and grow their business in the District of Columbia.

Learn more at dslbd.dc.gov/DCKivaHub

WWW.DCWBC.ORG

It is the mission of the Washington DC Economic Partnership, a 501(c)3 organization, to promote business opportunities throughout the District of Columbia and to contribute to business retention and attraction activities.

The Washington DC Economic Partnership supports businesses and entrepreneurs looking to open, expand, or invest in DC through our programs and services focusing on business development, education of the real estate market, and business opportunities. To learn more about the Washington DC Economic Partnership please visit wdcep.com. © 2021 Washington DC Economic Partnership — Published August 2021

WASHINGTON DC ECONOMIC PARTNERSHIP · 1495 F STREET NW · WASHINGTON, DC 20004 · (202) 661-8670 · WDCEP.COM

Check out our Small Business Video Library!

Stream seminars, panel discussions, and Q&As from DC's top business leaders and learn everything you need to know to start your own business venture For more information, visit wdcep.co/library.

WASHINGTON DC ECONOMIC PARTNERSHIP · 1495 F STREET, NW · WASHINGTON, DC 20004 · (202) 661-8670 · WDCEP.COM