Calling all mining companies: If you’re not thinking about equity crowdfunding, then you just don’t get it. You’re missing out on a market opportunity that totaled $65 billion in 2014. Equity Crowdfunding is the most disruptive thing to happen to the finance sector this century, and if you’re not considering it, then you should be. Here’s why:
The JOBS Act has increased your potential investor base exponentially, and democratized private investment like nothing else. Deloitte's 2015 Mining Industry Outlook report already pointed out that weakening prices have made investors wary, so it should be clear that the mining industry can’t keep pushing potential investors away. Equity crowdfunding is a viable solution to this problem, and the industry can’t afford to turn its nose up at it. It needs disruption, and it needs to adapt to survive.
I attended the PDAC mining conference in March of 2015, and saw firsthand what the mining industry is undergoing. Attendance was down almost 25% from 2013. The mining sector has hardened the hearts of retail investors. The question is, “Why?”
The answer is simple: You can’t keep trying to raise capital with techniques that worked 30 years ago.
To those mining companies that are receptive to new solutions and interested in equity crowdfunding, I’ll say the following: I’m here to help. Here is what you need to do to make it through your equity crowdfunding campaign successfully.
Stop talking to your potential investors as though they’re geologists or knowledgeable about the mining sector. Try to imagine what would happen in technology if we had to build all our gadgets from parts. The industry would never have evolved beyond the hardcore engineers and techno geeks. It would have never worked.
Equity Crowdfunding investment is all about the collective wisdom of groups. Individually, they aren’t necessarily coming into your deal with a consistent knowledge base, an understanding of the industry, or any experience with mining companies. They most certainly aren’t geologists, and you need to tailor your messaging accordingly. The same messaging that worked well for your small pool of informed investors is no longer sufficient. Mining companies need to learn how to speak to a new generation of investors, or die out.
A Marketing Plan
This is equity crowdfunding 101. In order to be successful with a capital raise that involves this kind of scale, you need to get the word out. Don’t sit back and expect that whatever portal you’re on will do the work. The portal likely has many deals live at once, and you’re competing for investor eyes. You need to have a good understanding of the avenues you’ll use to reach your audience, how you’ll be speaking to them, and most importantly, have already established a conversation.
Also, make sure that you have a plan that builds, and doesn’t stop once you get your first few investors. You need to keep the ball rolling, and use your marketing plan to build momentum during your campaign, and gain you shareholder goodwill once your funding round closes.
Social Media - Build a Presence
Equity Crowdfunding is a public thing, and you need to be very visible, both in terms of your brand, and your core team. Start building up your presence well before you plan to launch your campaign across social media. Your new potential investors are born digital, and they will use this presence to help them make their decision. The more you build your audience now, the more people you’ll be able to tell about your opportunity once it goes live, anyways.
In the mining sector, it’s often the case that the closest they come to social media is publishing news releases – in other words, they’re doing nothing. Imagine if Microsoft Corporation ($MSFT), Apple, Inc. ($AAPL), Google ($GOOG) and Netflix ($NFLX) couldn’t speak to their audience. They’re a publicly traded company, and each day they converse with their audience via multiple channels. So the argument that “we are public” doesn’t work.
What you need is a strategy that is the opposite of what you’re doing, and believe me, it doesn’t mean you will be offside with your regulatory compliance.
Ask Yourself if You’re Ready
No matter what equity crowdfunding portal you submit your opportunity to, the due diligence process will be largely the same, with some minor variations. Your portal won’t thank you for coming to it without having everything prepared, and you’ll do yourself an injustice that costs you time and money if you don’t make sure you’re ticking all the boxes from the start.
On your end, this means having all of your corporate information readily available, proactively organized, and shared with your portal, with oversight from your legal team.
Are you ready to be transparent? This word “transparent” is not new to listed issuers, yet in mining is often misunderstood. I recently had a meeting with an IR professional who was telling me the story of a CEO of a Mining Company, and their view of transparency is not to post anything on the website. They felt the investor should know to go to SEDAR to get their information. This arrogance is the very reason mining companies are miles away from investors.
Stepping into Equity Crowdfunding will mean becoming 100% transparent. It won’t be enough that you file your documents with regulators. You will also need to show your activities, be accountable in what you are doing. You will also need to have your entire team, management, board, advisors, and employees on social media, or at the very least on LinkedIn ($LNKD).
Equity Crowdfunding is the future. Traditional mining investors are aging, and their tolerance for risky mining projects is decreasing. In order to attract a new and younger investor, you have to play by new rules. Transparency, talking to new investors in a way that educates them, and connecting with them in a medium they understand (social media) is critical to getting new investors into mining investments. Change is not scary, it’s necessary, and the mining industry can thrive again if it learns to adapt. Or it can wait for that cycle that everyone keeps talking about. But here is the catch: traditional mining investors are gone…
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