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Chapters:
- The importance of a large fan/customer base
- How to draw in investors with early marketing? (early cost)
- Second-month marketing adjustments
- Marketing & advertising expenses - ratios
- Turning cashflow positive
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Okay, now, marketing in costs, marketing and marketing costs and, and cost in general. So primarily marketing, there's an exception. The exception is you've got a large fan base or you've got a large customer base that love you. Then marketing is inexpensive and it's all focused on making a compelling offering page, designing marvelous email messages to go to that list and raising money from them. Or if it's social media, designing the right communication to bring them in. You can raise all the money that way for virtually free, except for the preparation costs. In that lovely scenario, one company that I'm aware of did just that. This company vid Angel, raised $10 million their maximum in 12 days live to investors. They did have a break of about 10 days because they were, they had a problem, which they had to deal with. The problem states, they had to solve that problem.
And then they re then they went live again. But they raised that money by simply emailing their 30,000 happiest customers. That's all they did. No advertising expense of any significance. Few social media, organic posts, beautiful offering page and a well pitched message. $10 million in 12 days live is a record to my knowledge, and more power to them. The more companies we see like that, they'll be, they're super, super easy to do. Of course, in the normal mode where we don't have enough of a customer base or a fan base, the issuer, the company does not, then we need to build it from scratch, right? But you are really gonna raise the majority of, of the money from reach out advertising and social media, drawing in investors, and it's all about targeting, tuning, testing and adjusting and of course, upfront making sure that what is being sold to these investors is, excuse me, is appealing.
So one of the, our primary role at the beginning of discussions with companies is to figure out what the company does. You know, obviously it has to be a great company and all those obvious things, but how are we gonna make this appealing to the investors? What is it? Should, you know, what should it be? What should the offering be? So we can't tell our clients what they should be. We can tell them what won't work. We can tell them what the, what, what will have appeal to the audiences that we market to. So we do that. So by helping in that manner, then you're doing an offering you should do. 'cause I don't want you to do it at all. If it's gonna fail. And your the messaging and targeting and so forth starts off. 'cause We, we've thought about this a great deal, right?
With, with appropriate, appropriate test messages, test, advertising, test, test targeting. And in month one, literally you'll be spending $10,000 on advertising, just the advertising part. And so far, in every case, we've raised three to five times that much money in the first month, which is heinously inefficient, but not bad for the first month when we know we don't know what we're doing, right? So that's the way it works logistically and cost costwise for the marketing. So month two is better than month one, right? And if we're lucky, it's really a lot better. If we're not, then it's better. You know, and I'm, I'm recommending and the agency is recommending, we bring in the agency and we manage them jointly with you. They're recommending that we are recommending that you double, maybe you double spend or t travel the spend in month two, depending on the efficiency we reached at the exit point from month one, right?
This stuff's adjustable. The drop of a hat, day by day, the spend level on social media. So that's the nature of the beast. And we're constantly looking for higher and higher efficiency. And then as we get to the point that the acceptable efficiencies reached, then we encourage you to spend a lot more money and raise a lot more money fast. But, you know, that won't happen in, in the first two months. It takes a lot of testing and tuning and adjusting. So marketing, advertising expense, we wanna drive it as low as we possibly can, but you should assume, and, and there's another factor, which is once it starts to really work well and the efficiency is good, then, then when you step up the spend, the cost per investor goes up. Because the channels we use primarily Facebook, Instagram, they know they're doing well and we've stepped up to spend to mega bucks.
So they jack up the price, right? The efficiency drops off some for that. So being impatient is expensive. Managing that, doing some things to try and game their system to give us the better rates, again, which we do helps. But the cost of raise, you should expect marketing when it's all said and done to be the lowest we we've done is $3 and 30 cents. 3.3%, right on, on one. That's our lowest. But I wouldn't have you expecting that. I think you should expect 6%, 7%, maybe, maybe low. We'll do our best to keep bringing that down. But that's the likely cost. It's the single biggest expense in your Reg A+ offering with us. 'cause We're not a broker dealer. We don't charge a commission, and our fees are very modest. Okay? So I, I'm, I'm, I'm inadvertently or, or deliberately selling you on my company, which isn't the whole reason we are here is it guys, but let's see, cost.
Okay, now going over to cost costs, the rest of them too. B the least expensive. Assuming that you don't have a large captive audience to go to, let's assume that the least expensive way to reach the point that the offering is qualified by the SS e c and it's ready to go live. And we're raising money is about $150,000. And that assumes a simple audit. Okay? We can get it a little lower if we go looking for a less expensive attorney, but that includes everything. 150 K, that's the least it can be. There are lots of things we can do to raise it that I don't recommend, but, you know, you should assume that's the least expensive and have more money on hand just in case. And that assumes some prudent moves on your part, which I'll get into later, you know, mistakes to avoid.
Then after that's happened, we're raising money. We'll be cashflow positive from the raise relatively soon, relatively quickly as we move forward. When the offering is structured properly such that you have a minimum raise, you don't have, have, have an escrow with any amount of money that you need to close first. And when you, because we're coaching you and the attorney is coaching you when you write the offering document in, in such a way that you can use the proceeds to spend on the offering expenses. So in that context, then, cashflow wise, it was the upfront money. Unless we get really unlucky and have terrible investment returns for the first few months, in which cases, there are other expenses, but it's not gonna be terribly expensive. But they, they do exist. So I gave you the upfront cost. That's it. I reckon if you're doing a $12 million raise that my guidance to you is that the cash cost is gonna be about 12% plus warrants.
THIS TEXT TRANSCRIPT HAS ERRORS IN IT THAT WERE CAUSED BY THE SPEECH TO TEXT CONVERSION SOFTWARE WE USED. DO NOT DEPEND ON THE TEXT TO BE ACCURATE. WATCH THE RELEVANT PARTS OF THE VIDEO TO MAKE SURE YOU ARE PROPERLY INFORMED. DO NOT DEPEND ON THIS TEXT TRANSCRIPTION TO BE ACCURATE OR REFLECTIVE OF THE STATEMENTS OR INTENT OF THE PRESENTERS.
MSC is not a law firm, valuation service, underwriter, broker-dealer, or a Title III crowdfunding portal and we do not engage in any activities requiring any such registration. We do not provide advice on investments. MSC does not structure transactions. Do not interpret any advice from MSC staff as a replacement for advice from service providers in these professions. When Rod Turner provides advice this advice is based upon his observations of what works and what does not from a marketing perspective in online offerings. Rod does not tell the audience what to do, or how to do it. He advises the audience what is most likely to be easier to market cost-effectively in the online context. The choices of all aspects of companies' offerings are made by the companies that make offerings.
Rod Turner
Rod Turner is the founder and CEO of Manhattan Street Capital, the #1 Growth Capital service for mature startups and mid-sized companies to raise capital using Regulation A+. Turner has played a key role in building successful companies including Symantec/Norton (SYMC), Ashton Tate, MicroPort, Knowledge Adventure, and more. He is an experienced investor who has built a Venture Capital business (Irvine Ventures) and has made angel and mezzanine investments in companies such as Bloom, Amyris (AMRS), Ask Jeeves, and eASIC.
www.ManhattanStreetCapital.com
Manhattan Street Capital, 5694 Mission Center Rd, Suite 602-468, San Diego, CA 92108.