Take it to the Crowd: How Crowdfunding is Helping Tech Companies Raise Money to Help Families
If you’re a parent, odds are you’ve needed a babysitter at the last minute. We were in that situation and knew we weren’t alone. We knew that in our era, the struggle of finding reliable babysitters needed a tech-enabled solution. That was the impetus for starting Call Emmy, an on-demand babysitting service. It was thanks to crowdfunding from parents in the same struggle deciding to invest in us that helped us raise the money to make Call Emmy a reality.
They say all you need to build a business is a handy solution to a common problem (that competitors haven’t already beaten you to). But the other pillar lifting up every start-up is money. No matter what your brilliant idea is, it takes money to bring it to life. Crowdfunding democratizes that pillar, by allowing ordinary people to decide whether your product is worth their time and coin, instead of the usual investor options.
While there were those who didn’t think it could be done via crowdfunding, we did it, with our first user coming on board almost immediately. Just a year later, thanks to the help of those who chose to invest in us, we’re launching Call Emmy on a nationwide scale. Unsurprisingly, parents want to book high-quality, fully-vetted babysitters. The demand is there, it’s huge, and we’re answering it.
How Crowdfunding Has Changed
Back in 2012, the Jumpstart Our Business Startups (JOBS) Act set the stage for allowing privately-owned companies to raise capital from the public.For the first time, the masses could directly fund the ideas and start-ups they wanted to see in the world.
But crowdfunding has changed considerably since then. In November 2020, for example, the SEC changed regulations to widen the pools of both money and people businesses could raise from. Under the new rules, the amount startups can raise in one year from online crowdfunding marketplaces before SEC registration requirements kick in has risen from $1.07 million to $5 million. These changes reflect the reality that crowdfunding has become a legitimate and accepted method of obtaining capital for new enterprises. Start-ups like Call Emmy can now open their arms to more people who want to invest in making these dream businesses a reality.
New Accredited Investor Regulations
The SEC also broadened its definition of accredited investors. Accredited investors must have a net worth of $1 million—not including their primary residence—or those with an annual income above $200,000, or $300,000 for joint income. The income requirement holds for the previous two years, and the person or couple is expected to earn as much or more in the current year.
There is no formal process for becoming an accredited investor. The person or entity either meets financial requirements, or they don’t. The idea behind accredited investors is that these people or entities have a certain amount of financial sophistication. They have the ability to conduct due diligence on an investment, and understand the level of inherent risk. In other words, they do their research and can tell the difference between a legitimate business opportunity and a potential scam.
Amendments to the definition of accredited investor now permit investors to qualify if they hold specific professional certifications or credentials. It also includes “knowledgeable employees” of private funds and investment advisors registered with the SEC and their states. There is no limit on how much accredited investors may contribute to crowdfunding campaigns.
But there are still crowdfunding investment opportunities for those not meeting the accredited investor criteria! The SEC now allows individuals with a net worth of $107,000 or an annual income of at least that amount to contribute either 5% of their annual income or $2,200, whichever is greater, to crowdfunding campaigns.
What is the Best Use for Crowdfunding?
Crowdfunding an ideal way for individuals to invest in for consumer brands such as Call Emmy. Because it involves raising money from the public, it is key that people recognize the brand’s uses and the needs it meets.
Highly technical companies might not benefit as much from crowdfunding to raise equity, because the average investor does not really fathom what they do. Tech companies providing a specific consumer service, like Call Emmy, are different. Consumers know there’s an app for everything, and can determine whether such a venture fulfills an unmet need.
Keep in mind that crowdfunding investments are not liquid in the manner of publicly traded stocks. There are risks and no guarantees, so it’s critical for investors to do their homework regarding the particular startup.
The Benefits of Equity Crowdfunding
Becoming a publicly traded company requires access to huge amounts of capital. Venture capitalists and hedge funds provide these funds to a relatively small amount of companies, but most startups don’t have the ability to secure this type of funding.
Even the most promising of startups can’t move forward without funding. Equity crowdfunding allows the public to invest in privately-owned companies. In return for the investment, the equity crowdfunding investor receives shares of the company.
If the company grows and becomes successful, the value of shares increases. Every investor wants to get in on the ground floor of a terrific business. Most startups are not going to become the next Amazon or Starbucks, and the truth is that the majority will fail. However, if the investor does their research and finds the company has potential, there is an opportunity to net a good return on investment.
Invest in Call Emmy
One of investment giant Warren Buffett’s best pieces of advice is to buy what you know. He doesn’t invest in businesses he doesn’t understand, which is one of the reasons he’s the sixth-richest person in the world.
Similarly, that’s why Call Emmy has been such a success. Parents relate to the needs we’re trying to solve, understand the concept, and know what potential we have.
Call Emmy’s operations are straightforward. We have one of the most rigorous screening processes in the industry, allaying the major parental fear. Candidates must pass a criminal background check, skills test, a behavioral profiling test, and submit a complete biography. We are notified at once if there is any change in our sitters’ records. All Call Emmy engagements are fully bonded and insured.If you’re in need of a last-minute sitter, sign up with Call Emmy. And if you’re in search of an investment with the potential for a good return, invest in Call Emmy on Republic!
In fact, hire a sitter through us and find out first-hand just how smoothly and efficiently the process works. We think you’ll realize that our babysitting app is the solution million of parents need, and your investment can help us grow into a national powerhouse. Who knows? Maybe someday we’ll be the Google of short-term childcare providers. And you got in on the ground floor.