CrowdExpert.com Interview with Darren Marble, CEO of CrowdfundX, a Los Angeles based full service equity crowdfunding marketing agency that’s leading the space in promoting Reg A+ investment crowdfunding campaigns.
Recently we’ve been getting deep into the subject of Crowdfunding Marketing Agencies, mostly wondering why we’re not seeing more of them as there is a lot of demand from people that want help running their crowdfunding campaigns. In our research we came across one great example to the contrary, which is CrowdfundX, a full service marketing agency for larger investment crowdfunding offerings. I got Darren Marble on the phone and was really impressed with his perspective on the industry and the work they were doing promoting investment crowdfunded offerings. CrowdFundX does the kind of multi-channel marketing work for clients launching investment crowdfunding campaigns that is normally done by several agencies over a much longer time period, and with the added challenge that this marketing is directed not just towards customers but to investors. It’s super interesting stuff.
Here’s our conversation:
CrowdExpert: Tell me again the story of how CrowdfundX got started and grew up to where it is now.
Darren Marble: We started the company five years ago and evolved over time (after two failed business models) into a crowdfunding agency. Our first revenue-generating line of business was a social media marketing service called AudienceID, and our early clients were filmmakers, production companies and celebrities.
I saw the opportunity to apply this service to crowdfunding campaigns, and we launched CrowdfundX shortly after. Initially, we were focused on rewards-based campaigns and were doing pure social media marketing. Two years and 75 campaigns later, we rolled in branding and advertising, video production, graphic design, media outreach, digital marketing and media buying into our service portfolio. Today we are a full-service crowdfunding agency.
Our first Reg A+ equity campaign was for Elio Motors, an automotive startup based in Phoenix, AZ. We launched the campaign on StartEngine on June 19, 2015, the day Reg A+ crowdfunding became legal in the U.S. At nearly $40 million in expressed interest from more than 10,000 prospective investors, it’s currently the largest equity crowdfunding campaign in the country.
CE: I do not envy your job. Full stack marketing for startups is hard work. We recently wrote an article discussing how managing small and medium sized rewards crowdfunding campaigns is super tough, and why we don’t see more agencies and consultants providing that service. What was your experience? Any good war stories?
DM: Crowdfunding campaigns in general are difficult to plan and execute. In the rewards space, most campaigns fail, and the average raise for successful campaigns is less than $10K. For this reason, we are seeing more agencies and individual campaign managers emerge.
The challenge in this space is that most creators don’t have much (if any) budget to pay consultants. Although we’ve done several full-service rewards-based campaigns on platforms like Kickstarter and Indiegogo, it’s a tough sell. We found a better solution was to offer a specific service, like influencer marketing, at a lower cost. We took this approach with the Mega Bots campaign, which we helped to raise $550K on Kickstarter.
CE: Investment Crowdfunding Marketing is an exceptionally challenging undertaking. You basically have to start with a company that barely has a brand, usually doesn’t even have a finished product out yet, has only just started building their social media following or doing PR, and get them from that early starting point, to a position where people are not just interested in buying their (still nonexistent) product, but actually investing their savings as they would in a company like Google, Apple, or Amazon. Actually, it’s even worse than that because these crowdfunded startup companies have no liquidity, and acquisitions are very uncertain and very far away. It’s an immense challenge.
Usually the marketing activities in creating a brand, introducing a new product to market, and eventually appealing to public investors to trust their own savings in a company’s future happen over a time scale of years and years, for the few companies that even make it that far. How do you squeeze all of this into such a small time frame? What marketing activities do you actually perform for your clients and how long does it take to prepare for and execute an equity crowdfunding campaign?
DM: Big campaigns require thoughtful multi-channel marketing efforts. Our typical Reg A+ marketing plan includes 10-12 unique marketing activities, spanning traditional PR, blog outreach, social marketing, advocate marketing, influencer marketing, experiential marketing, digital marketing, email marketing, and media buying. We split our media buying budget between Facebook ad buying and programmatic media buying.
Part of our strategy revolves around influencer marketing, which is a savvy way to get a company’s brand and campaign in front of thousands or even millions of people. Influencers by definition already an engaged built-in audience. When you offer something of value to influencers – usually a unique ‘experience’ – it’s a great hook to have them agree to promote the campaign on their channel(s).
Our ramp-up time for most campaigns is 30 to 60 days. It’s a short window, but we’ve learned over the years how to execute for the highest impact with extreme efficiency. Most of our engagement are 3-4 month projects.
CE: Who is the audience? How do you identify and communicate with not just the people that are excited for a new company or product, but actually would want to invest in the company via equity crowdfunding, which is in itself totally new and confusing.
DM: We make educated guesses about who we think the audience is, and then narrow our focus based on real-time data gleaned from the live campaign. In most cases, we are targeting millennials and Gen X audiences.
What’s great is that people know exactly what they’re not getting in rewards-based campaigns: ownership. We’ve found that as they become educated about their new ability to invest in private companies, they are eager to get in on the action. The idea that you couldn’t invest in Tesla – but you can invest in Elio – is compelling when messaged properly.
We have also had a lot of success using Facebook Lookalike audiences once we get the first 500-1000 reservations in, and execute Facebook ad buys against this audience. The key is to get the initial reservations in through organic traffic.
CE: Let’s talk honestly about costs for a minute. Of course every client, every market, every situation is different, depending on timeline, scope, starting point, expectations and budget. But on average, or ballpark estimate at least, about what does it cost to launch and market a successful equity crowdfunding campaign, and how do you charge your clients?
DM: Our fees range from $10K for a pure Advisory engagement to $150K for a full-service engagement, on average. I just sent out a contract for $250K which includes a substantial media buy budget. In addition to cash deals, we do deals for cash plus equity as well as equity only, depending on the client and campaign. We have an investment committee that evaluates these opportunities on a case-by-case basis.
I know many people will see the numbers above and be taken aback. What you have to consider is that Reg A+ equity crowdfunding is ideal for growth companies. Most of our clients have already raised capital in previous rounds, and almost all of them have ambitious funding goals. These companies have one chance to get it right, and they are willing to pay for marketing services that mitigate campaign risk and increase their likelihood of success.
Beyond raising capital, we create tremendous brand equity for our clients. As an example, we had XTI Aircraft featured in over 50 outlets, including CNN, Fortune, Entrepreneur, Popular Science, Popular Mechanics and others within the first two weeks of launching. Results like this are not easy to achieve, and they are extremely valuable to any business.
Lastly, consider a company that raises $10 million through equity crowdfunding. If the total costs for legal and accounting, platform fees, broker-dealer fees and marketing come in under $500K, that’s a low cost of capital, relatively speaking. An investment bank might charge 7-9% of the raise, and in general, the smaller the financing, the higher the variable percentage fee is applied to the capital raised.
In the context of the brand equity we’re creating for our clients, combined with the lower cost of capital, I think our fees are very reasonable.
CE: Why are you guys focusing entirely on Title IV Reg A+ offerings and not Title II 506(c) offerings? Aren’t both of those viable types of equity crowdfunding? What is the difference from a marketing standpoint?
DM: At the moment, we are exclusively focused on Reg A+ campaigns. It’s difficult to market Title II offerings as the platforms that host those campaigns don’t easily allow for issuers or agencies to promote to their marketplace of accredited investors. This is one of the reasons why more and more companies are opting to pursue Reg A+ campaigns on platforms like StartEngine.
CE: What do you see in the future for Equity Crowdfunding? Is Title III going to happen? Is it going to matter? What more could we be doing with Reg A+ offerings that we’re not seeing yet?
DM: Title III is definitely happening, and we are hearing that it could go into effect as early as Q1 2016. Title III will allow entrepreneurs to raise up to $1M annually by soliciting both unaccredited and accredited investors, at a fraction of the cost of a Reg A+ campaign. The lower costs associated with Title III campaigns will create massive opportunity for the small businesses in our country that don’t have easy access to capital.
Prior to Reg A+, startups were limited to raising money from the 3.5 million accredited investors in the U.S. There are now close to 240 million Americans who are eligible to invest in private companies. Even if a small percentage, say 5%, of this group actually invest, we’re still talking about billions of new dollars flowing into private companies. The numbers are stunning.
CE: What’s the future for CrowdfundX? What’s in the pipeline?
DM: Our pipeline is bigger than ever, which is a blessing, and we are scaling fast. We are in talks with companies across almost every industry, from startups to nationally known brands with millions of fans. (You will start to see more established businesses take advantage of Reg A+ in the near future.)
We have some big things around the corner in 2016 which I can’t publicly discuss yet, but are in the works. You’ll have to stay tuned : )
