DTC brands turn to crowdfunding investments as recession looms

DTC brands turn to crowdfunding investments as recession looms

August 30, 2022
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Recession looms, inflation is at a 40-year record high, and supply-chain issues and advertising uncertainty abound. As a result, DTC brands are facing a VC funding drought. 

Men’s clothing rental business, Seasons, was forced to close down after failing to secure funding this year. Haus, a craft cocktails brand, is up for sale after its potential lead investor pulled out. And shares of most DTC unicorns—like Glossier, Allbirds, Warby Parker, and Stichfix—have been slashed this year, further cautioning investors. 

Chris Meade, Co-founder of backyard sports game brand, CROSSNET, experienced the pullback from VCs first-hand after dozens of calls in August. “What I found is that venture capitalists now are looking for unicorns, they're looking for that next 10 to 50x valuation. And you’ve got to either have a tech component or a CPG component. And if you're in a consumable hardline space like I am, they probably aren't the best fit. I'll take a call to VC any day, but I'm kind of done after about a month of doing this.”

The uncertainty in the current eCommerce environment along with the pullback from VCs has led to tougher sledding for brands looking to raise capital rounds. But it’s not all doom and gloom.

Over the past month, a group of community-driven DTC brands has turned to crowdfunding as a means to fuel growth. Obvi, CROSSNET, and Wunderkeks publicly launched investment rounds targeting different audiences—from customers, friends, and family to DTC founders and angels.

The initial results seem promising. Obvi, a collagen and supplements brand, raised double its initial crowdfunding goal in less than 30 days. And CROSSNET raised $250,000 within a few days after announcing their Series A round.

We spoke with the founders of Obvi and CROSSNET to capture their best advice for raising amidst the economic downturn.

Inside Obvi and CROSSNET’s fundraising journey

Obvi

The founders at Obvi pride themselves on building a bootstrapped business that has been profitable since Day 1 —and they’ve sold more than $36 million in health supplements in 39 months.

So it may have come as a surprise for some when the brand announced it was raising a $15 million Series A round, looking to secure $1 million through crowdfunding and the remaining funds through venture capital. 

So why did Obvi decide to raise, for the first time ever, in this economic downturn? 

“Right now we’re in one of the worst climates in the history of business building. So when we understood the climate, we saw a lot of our competitors and even my own peers in other industries starting to pull back,” said Obvi Co-founder and CEO, Ronak Shah. “But for us, we're actually able to really have a low cost per acquisition and we're still doing record-breaking numbers every month. So what if while everyone is pulling back we raise some significant capital and double down on marketing? And that’s what we decided to do.”

Today Obvi consists of an eight-person team, but to meet the opportunities in licensing deals and mass retail the company must invest in human capital, Shah added.

Obvi opted to raise using Roll Up Vehicles (RUVs), a new form of crowdfunding investment created by AngelList.

One of the main differences between traditional crowdfunding methods and an RUV is the complete privacy that the latter offers. The only way for someone to view and invest in a RUV is through an invite link that founders can manage and share with potential investors.

Another key benefit of RUVs? Founders can choose how much money is the minimum on the link sent to each investor, which allows operators like Shah to be more strategic with their investment asks.

However, it’s worth noting RUVs require investors to be accredited and there’s also a limit of 250 investors. 

Shah shared more on the process to set up a RUV in a Twitter thread:

You already know the end of the story. 

It turns out Obvi raised exceeded its crowdfunding goal, raising a total of $2 million, through their RUV.

CROSSNET

CROSSNET’s story is in many ways similar to Obvi’s. Both brands were founded by three friends and bootstrapped—until now.

The decision to fundraise didn’t come lightly, but it was much needed to scale faster according to CROSSNET CMO Chris Meade. The company plans on growing its retail door count to 6,000 plus stores, expanding into soccer, pickleball and a handful of new SKUs. They will also use the capital to break into 47 new countries and double their school accounts.  

“We come from a small farm town in Connecticut. There's no Shopify, there's no extra capital, there's no eCommerce, it just doesn't exist. There's a chicken tender restaurant and a gas station that's 30 minutes away. So to be making phone calls to venture capitalists also didn’t exist to me. Knowing that I wanted this round to be completed in about two months, I didn't want to bank on closing venture capital money when I've never talked to venture capitalists before. What I do know is I’ve built a great personal brand, I have a lot of well-connected friends, and I have a brand that I'm very proud of that people love. So I figured we'd be able to raise pretty quickly and efficiently from our network. Even easier than the VC route,” says Meade.

Using crowdfunding platform WeFunder, CROSSNET opted to launch a public round that is open to anyone who wishes to invest. They’re looking to secure $1 million through WeFunder (which seems promising given the initial interest in the round) and another $1 million from a family office or venture capitalist as their lead investor.

Now, you’re probably asking yourself “what are family offices?”

Family offices are private wealth advisory firms that manage investments for high-net-worth families. Or as Meade would put it:

“They are groups of people/families who have acquired remarkable wealth in their lifetime and are now looking to make strategic investments in brands like CROSSNET that could yield them a nice 4-10x return on their money.“

Meade shared his desire to raise the full $2 million round on WeFunder, but the Regulation Crowdfunding law created by the JOBS Act in 2016 allows startups to raise a maximum of $1,070,000 per year from an unlimited number of investors. There’s a way to circumvent the crowdfunding cap, but according to Meade “it would require a very expensive audit that could take over 3 months.”

If you’re anything like me, your next question will likely be: why did this regulation not apply to Obvi? (They did raise $2 million, remember?).

Because though a RUV sounds like crowdfunding, it’s technically not. 

Sumukh Sridhara, Founder Products Lead at AngelList, explains that “crowdfunding has a specific meaning in the letter of the law and is generally perceived as letting anyone invest. Since RUVs require investors to be accredited, crowdfunding limit rules don’t apply.”

One disadvantage of crowdfunding with an RUV is that founders don’t immediately have access to the capital. Whereas through traditional crowdfunding, businesses like CROSSNET can make use of the capital as soon as it hits the bank account. 

9 lessons and tips from founders who crowdfunded in 2022

Become the student

Chris Meade put it best when speaking about his knowledge of raising capital, “I quickly realized I didn't know shit about how investments, private equity, and venture capital actually works.”

So what did he do? He read and talked to people who have done it before.

Shah, for instance, learned about ways to raise capital by reading about it on Twitter and LinkedIn, tapping into mentors, advisors and even strangers.

“I asked a lot of questions. When you have no ego, it's your first time doing it, and you can act like a complete beginner, people are really willing to help you. I became a student for at least a few months before I started this.”

Balance business and fundraising by setting a realistic timeframe 

There is no real science when it comes to setting a timeframe for fundraising.

But the one thing to keep in mind according to Shah and Meade is to not underestimate the amount of time fundraising consumes and the toll it may take on the hours spent in the business. 

“You have to find the perfect balance that works for you. Because, for me, the sense of urgency made me focus on this a lot. However, it was tough balancing and running the business too. When I look back, had I put my timeline to 60 days, instead of 30 days, I probably could have gone a little bit easier,” said Shah.

Meade felt similar, “Every meeting, every call, everything that I'm doing now is so different from what I was doing a month ago, which is fine. But I'm very distracted from the business, right? Where do I find time to fix my Shopify store? It’s tiring, it’s exhausting.” 

Start making connections NOW

Over the next six months, there will be a lot of companies trying to raise with their backs against the wall—we’re already seeing it. Part of the problem is using fundraising as a last-ditch effort when things go bad, but part of it is the lack of connection between founders and potential investors. 

Meade has one piece of advice every founder should heed to. “I wish I would have connected with private equity, venture, and family offices much sooner because you never know when you're going to need to raise. Building those connections before you even need it, I think that's what a lot of founders should be doing right now.”

Meade didn’t have any VC, angel, and family office connections before deciding to raise (part of the reason why he opted to crowdfund), but he still found himself needing to reach out to investors. His outreach hack?

  1. Read articles about CPG and DTC brands that recently raised
  2. Identify the top investors
  3. Find them on LinkedIn
  4. Reach out with a personalized message (I’ve seen you invested in my friend’s brand and here’s why you should invest in mine)

“What I quickly learned too is that people who have raised money want to make their investors happy. So they're glad to introduce them to people that they think are a good bet and worth an introduction,” he added.

Tier your outreach if you take the RUV route

Shah believes this to be one of his biggest lessons. 

“When you set out to go this RUV route, you need to have a good balance of mixing friends, family, and then peers, and your network. What was tricky for me is I kind of blasted everyone at the same time and I didn't tier groups. I ended up having to talk to certain people a certain way, or certain groups another way. And my strategy was a little bit all over the place.”

Shah elaborated that if he were to go back, he would divide and rank groups of investors. “Here's my tier of people I really want to get in first, then once they're in, I'll go to this group.”

Your network is powerful, use it

Whether it’s to make introductions, learn more about fundraising, or even invest in your business, we’ve established that a network can be one of your most powerful allies when fundraising.

Take Obvi, for example. Ashwin Melwani and Ron Shah tapped into a community of DTC founders and angels they’ve built throughout 10 years in the eCommerce ecosystem. Now Obvi not only has part of the funding it needs to accelerate growth, but it can also count on a whole class of eCommerce professionals with decades of expertise—media buyers, agency owners, DTC founders, retention experts, and the list goes on. 

Once the full round closes, Shah is creating an optional Slack channel for all the investors with an eCom background. “The slack chat will be an opportunity where everyone can get to mastermind. They all invested in Obvi and they’re all eCom founders so I would love to bring value back to everyone, where it doesn't have to just be about Obvi, you can also be all helping each other.”

Crowdfunding is a lot about marketing 

When doing a traditional crowdfund that’s open to the public, one thing is clear: you want to get as much visibility to your page as possible.

CROSSNET has done more than $250,000 in 10 days using only owned channels and word of mouth to promote the round, including:

  • 2x dedicated emails to CROSSNET’s email list 
  • 2x inclusions in Meade’s Crossed Commerce newsletter
  • Social media posts from CROSSNET and Meade’s LinkedIn and Twitter accounts

To reach the $1 million goal by early October, Meade also plans to amplify promotion through Facebook advertising. “Later on, we’ll be running performance marketing ads on it. So putting Facebook dollars behind it saying: here's your chance to invest in the fastest growing sport ever.”

Leverage early investors to create FOMO, but be wary of…

Shah used the permission of early investors to leverage others in their network to get them to invest. “Creating some sense of FOMO on the opportunity is important given we have a cut-off date,” he explained. 

He had early investors share they invested on Obvi via Twitter and would then RT from his account. During the last week of July, if you are on eCom Twitter, chances are you saw a post about Obvi’s fundraising. 

Shah noted that part of their strategy was to create actual FOMO through social media, but he also emphasized that another part of it happened naturally.

“The first week started off a little slow, somebody put in $2,500, somebody put in $25,000. And then after four or five days, we've had about $200,000, so we thought we'd probably get to finish this off in two months. Then the next week hit and I saw somebody put in $100,000. Somebody else put in $25,000. And now we were accelerating at a much quicker run rate. So I let everyone know ‘it looks like at this point here, this is going much faster than expected’ and I would send a screenshot of my total investment just so it didn’t look fake. And I think all of a sudden, knowing ‘I may not be able to take your money if you invest after another week’, investments just skyrocketed.”

But there are pros and cons to fomenting FOMO according to Shah. Obvi got a lot of people to invest quickly, but he believes that some people might have rushed their investment and would’ve invested more if they took more time to go through it.

So try to create FOMO, but be wary of rushing investors. 

Resilience is the name of the game

Much like building a business, fundraising is about being resilient—regardless of the method you choose, whether it’s crowdfunding, VC, family office, or a mix. 

“Fundraising, it's kind of sad at times. Nobody likes to get turned down eight times a day. But, you just have to keep getting turned down until you find that one or two people that believe in you,” says Meade. 

Shah agrees, “Getting a ‘no’ or ‘not interested’ doesn't mean your business sucks. It means this is an opportunity they don't want to take on right now! 85% of people I reached out to passed on the raise.”

Crowdfunding is not for everyone

Crowdfunding can be a great alternative for DTC brands looking for funding. Still, it may not work for everyone.

Gwella Mushrooms founder, Stefany Nieto, had been seeing a lot of companies in DTC raise through crowdfunding, so she decided to investigate the possibility.

But she found that crowdfunding wasn’t right for Gwella. 

“While we're a Canadian-incorporate company, the majority of our community is currently US-based. The issue with this is that when you're crowdfunding capital through any of these new platforms, you can only raise capital from communities in which you are incorporated. For us, this would likely result in a lackluster crowdfunding campaign,” Nieto says.

Through her research, Nieto also found the fees that crowdfunding platforms charged were not as startup-friendly as she expected, “fees were between $10-$15K in upfront costs, plus 7% of total raised capital.” 

Crowdfunding: the new go-to for community-centric brands 

We’re in the middle of an economic downturn and eCommerce slowdown, but that doesn’t mean that you can’t continue to grow and seek the means to do so. 

Crowdfunding has proven to be a great alternative for DTC brands centered around community and founders who embrace the “build in public” approach. 

Brands like Obvi and CROSSNET have shown that there’s still much opportunity to find capital, even when things may be looking down. So take some of their experience and use it to inspire your own funding and founder journey. We’ll be watching!

Share

DTC brands turn to crowdfunding investments as recession looms

Listen to this episode:

Recession looms, inflation is at a 40-year record high, and supply-chain issues and advertising uncertainty abound. As a result, DTC brands are facing a VC funding drought. 

Men’s clothing rental business, Seasons, was forced to close down after failing to secure funding this year. Haus, a craft cocktails brand, is up for sale after its potential lead investor pulled out. And shares of most DTC unicorns—like Glossier, Allbirds, Warby Parker, and Stichfix—have been slashed this year, further cautioning investors. 

Chris Meade, Co-founder of backyard sports game brand, CROSSNET, experienced the pullback from VCs first-hand after dozens of calls in August. “What I found is that venture capitalists now are looking for unicorns, they're looking for that next 10 to 50x valuation. And you’ve got to either have a tech component or a CPG component. And if you're in a consumable hardline space like I am, they probably aren't the best fit. I'll take a call to VC any day, but I'm kind of done after about a month of doing this.”

The uncertainty in the current eCommerce environment along with the pullback from VCs has led to tougher sledding for brands looking to raise capital rounds. But it’s not all doom and gloom.

Over the past month, a group of community-driven DTC brands has turned to crowdfunding as a means to fuel growth. Obvi, CROSSNET, and Wunderkeks publicly launched investment rounds targeting different audiences—from customers, friends, and family to DTC founders and angels.

The initial results seem promising. Obvi, a collagen and supplements brand, raised double its initial crowdfunding goal in less than 30 days. And CROSSNET raised $250,000 within a few days after announcing their Series A round.

We spoke with the founders of Obvi and CROSSNET to capture their best advice for raising amidst the economic downturn.

Inside Obvi and CROSSNET’s fundraising journey

Obvi

The founders at Obvi pride themselves on building a bootstrapped business that has been profitable since Day 1 —and they’ve sold more than $36 million in health supplements in 39 months.

So it may have come as a surprise for some when the brand announced it was raising a $15 million Series A round, looking to secure $1 million through crowdfunding and the remaining funds through venture capital. 

So why did Obvi decide to raise, for the first time ever, in this economic downturn? 

“Right now we’re in one of the worst climates in the history of business building. So when we understood the climate, we saw a lot of our competitors and even my own peers in other industries starting to pull back,” said Obvi Co-founder and CEO, Ronak Shah. “But for us, we're actually able to really have a low cost per acquisition and we're still doing record-breaking numbers every month. So what if while everyone is pulling back we raise some significant capital and double down on marketing? And that’s what we decided to do.”

Today Obvi consists of an eight-person team, but to meet the opportunities in licensing deals and mass retail the company must invest in human capital, Shah added.

Obvi opted to raise using Roll Up Vehicles (RUVs), a new form of crowdfunding investment created by AngelList.

One of the main differences between traditional crowdfunding methods and an RUV is the complete privacy that the latter offers. The only way for someone to view and invest in a RUV is through an invite link that founders can manage and share with potential investors.

Another key benefit of RUVs? Founders can choose how much money is the minimum on the link sent to each investor, which allows operators like Shah to be more strategic with their investment asks.

However, it’s worth noting RUVs require investors to be accredited and there’s also a limit of 250 investors. 

Shah shared more on the process to set up a RUV in a Twitter thread:

You already know the end of the story. 

It turns out Obvi raised exceeded its crowdfunding goal, raising a total of $2 million, through their RUV.

CROSSNET

CROSSNET’s story is in many ways similar to Obvi’s. Both brands were founded by three friends and bootstrapped—until now.

The decision to fundraise didn’t come lightly, but it was much needed to scale faster according to CROSSNET CMO Chris Meade. The company plans on growing its retail door count to 6,000 plus stores, expanding into soccer, pickleball and a handful of new SKUs. They will also use the capital to break into 47 new countries and double their school accounts.  

“We come from a small farm town in Connecticut. There's no Shopify, there's no extra capital, there's no eCommerce, it just doesn't exist. There's a chicken tender restaurant and a gas station that's 30 minutes away. So to be making phone calls to venture capitalists also didn’t exist to me. Knowing that I wanted this round to be completed in about two months, I didn't want to bank on closing venture capital money when I've never talked to venture capitalists before. What I do know is I’ve built a great personal brand, I have a lot of well-connected friends, and I have a brand that I'm very proud of that people love. So I figured we'd be able to raise pretty quickly and efficiently from our network. Even easier than the VC route,” says Meade.

Using crowdfunding platform WeFunder, CROSSNET opted to launch a public round that is open to anyone who wishes to invest. They’re looking to secure $1 million through WeFunder (which seems promising given the initial interest in the round) and another $1 million from a family office or venture capitalist as their lead investor.

Now, you’re probably asking yourself “what are family offices?”

Family offices are private wealth advisory firms that manage investments for high-net-worth families. Or as Meade would put it:

“They are groups of people/families who have acquired remarkable wealth in their lifetime and are now looking to make strategic investments in brands like CROSSNET that could yield them a nice 4-10x return on their money.“

Meade shared his desire to raise the full $2 million round on WeFunder, but the Regulation Crowdfunding law created by the JOBS Act in 2016 allows startups to raise a maximum of $1,070,000 per year from an unlimited number of investors. There’s a way to circumvent the crowdfunding cap, but according to Meade “it would require a very expensive audit that could take over 3 months.”

If you’re anything like me, your next question will likely be: why did this regulation not apply to Obvi? (They did raise $2 million, remember?).

Because though a RUV sounds like crowdfunding, it’s technically not. 

Sumukh Sridhara, Founder Products Lead at AngelList, explains that “crowdfunding has a specific meaning in the letter of the law and is generally perceived as letting anyone invest. Since RUVs require investors to be accredited, crowdfunding limit rules don’t apply.”

One disadvantage of crowdfunding with an RUV is that founders don’t immediately have access to the capital. Whereas through traditional crowdfunding, businesses like CROSSNET can make use of the capital as soon as it hits the bank account. 

9 lessons and tips from founders who crowdfunded in 2022

Become the student

Chris Meade put it best when speaking about his knowledge of raising capital, “I quickly realized I didn't know shit about how investments, private equity, and venture capital actually works.”

So what did he do? He read and talked to people who have done it before.

Shah, for instance, learned about ways to raise capital by reading about it on Twitter and LinkedIn, tapping into mentors, advisors and even strangers.

“I asked a lot of questions. When you have no ego, it's your first time doing it, and you can act like a complete beginner, people are really willing to help you. I became a student for at least a few months before I started this.”

Balance business and fundraising by setting a realistic timeframe 

There is no real science when it comes to setting a timeframe for fundraising.

But the one thing to keep in mind according to Shah and Meade is to not underestimate the amount of time fundraising consumes and the toll it may take on the hours spent in the business. 

“You have to find the perfect balance that works for you. Because, for me, the sense of urgency made me focus on this a lot. However, it was tough balancing and running the business too. When I look back, had I put my timeline to 60 days, instead of 30 days, I probably could have gone a little bit easier,” said Shah.

Meade felt similar, “Every meeting, every call, everything that I'm doing now is so different from what I was doing a month ago, which is fine. But I'm very distracted from the business, right? Where do I find time to fix my Shopify store? It’s tiring, it’s exhausting.” 

Start making connections NOW

Over the next six months, there will be a lot of companies trying to raise with their backs against the wall—we’re already seeing it. Part of the problem is using fundraising as a last-ditch effort when things go bad, but part of it is the lack of connection between founders and potential investors. 

Meade has one piece of advice every founder should heed to. “I wish I would have connected with private equity, venture, and family offices much sooner because you never know when you're going to need to raise. Building those connections before you even need it, I think that's what a lot of founders should be doing right now.”

Meade didn’t have any VC, angel, and family office connections before deciding to raise (part of the reason why he opted to crowdfund), but he still found himself needing to reach out to investors. His outreach hack?

  1. Read articles about CPG and DTC brands that recently raised
  2. Identify the top investors
  3. Find them on LinkedIn
  4. Reach out with a personalized message (I’ve seen you invested in my friend’s brand and here’s why you should invest in mine)

“What I quickly learned too is that people who have raised money want to make their investors happy. So they're glad to introduce them to people that they think are a good bet and worth an introduction,” he added.

Tier your outreach if you take the RUV route

Shah believes this to be one of his biggest lessons. 

“When you set out to go this RUV route, you need to have a good balance of mixing friends, family, and then peers, and your network. What was tricky for me is I kind of blasted everyone at the same time and I didn't tier groups. I ended up having to talk to certain people a certain way, or certain groups another way. And my strategy was a little bit all over the place.”

Shah elaborated that if he were to go back, he would divide and rank groups of investors. “Here's my tier of people I really want to get in first, then once they're in, I'll go to this group.”

Your network is powerful, use it

Whether it’s to make introductions, learn more about fundraising, or even invest in your business, we’ve established that a network can be one of your most powerful allies when fundraising.

Take Obvi, for example. Ashwin Melwani and Ron Shah tapped into a community of DTC founders and angels they’ve built throughout 10 years in the eCommerce ecosystem. Now Obvi not only has part of the funding it needs to accelerate growth, but it can also count on a whole class of eCommerce professionals with decades of expertise—media buyers, agency owners, DTC founders, retention experts, and the list goes on. 

Once the full round closes, Shah is creating an optional Slack channel for all the investors with an eCom background. “The slack chat will be an opportunity where everyone can get to mastermind. They all invested in Obvi and they’re all eCom founders so I would love to bring value back to everyone, where it doesn't have to just be about Obvi, you can also be all helping each other.”

Crowdfunding is a lot about marketing 

When doing a traditional crowdfund that’s open to the public, one thing is clear: you want to get as much visibility to your page as possible.

CROSSNET has done more than $250,000 in 10 days using only owned channels and word of mouth to promote the round, including:

  • 2x dedicated emails to CROSSNET’s email list 
  • 2x inclusions in Meade’s Crossed Commerce newsletter
  • Social media posts from CROSSNET and Meade’s LinkedIn and Twitter accounts

To reach the $1 million goal by early October, Meade also plans to amplify promotion through Facebook advertising. “Later on, we’ll be running performance marketing ads on it. So putting Facebook dollars behind it saying: here's your chance to invest in the fastest growing sport ever.”

Leverage early investors to create FOMO, but be wary of…

Shah used the permission of early investors to leverage others in their network to get them to invest. “Creating some sense of FOMO on the opportunity is important given we have a cut-off date,” he explained. 

He had early investors share they invested on Obvi via Twitter and would then RT from his account. During the last week of July, if you are on eCom Twitter, chances are you saw a post about Obvi’s fundraising. 

Shah noted that part of their strategy was to create actual FOMO through social media, but he also emphasized that another part of it happened naturally.

“The first week started off a little slow, somebody put in $2,500, somebody put in $25,000. And then after four or five days, we've had about $200,000, so we thought we'd probably get to finish this off in two months. Then the next week hit and I saw somebody put in $100,000. Somebody else put in $25,000. And now we were accelerating at a much quicker run rate. So I let everyone know ‘it looks like at this point here, this is going much faster than expected’ and I would send a screenshot of my total investment just so it didn’t look fake. And I think all of a sudden, knowing ‘I may not be able to take your money if you invest after another week’, investments just skyrocketed.”

But there are pros and cons to fomenting FOMO according to Shah. Obvi got a lot of people to invest quickly, but he believes that some people might have rushed their investment and would’ve invested more if they took more time to go through it.

So try to create FOMO, but be wary of rushing investors. 

Resilience is the name of the game

Much like building a business, fundraising is about being resilient—regardless of the method you choose, whether it’s crowdfunding, VC, family office, or a mix. 

“Fundraising, it's kind of sad at times. Nobody likes to get turned down eight times a day. But, you just have to keep getting turned down until you find that one or two people that believe in you,” says Meade. 

Shah agrees, “Getting a ‘no’ or ‘not interested’ doesn't mean your business sucks. It means this is an opportunity they don't want to take on right now! 85% of people I reached out to passed on the raise.”

Crowdfunding is not for everyone

Crowdfunding can be a great alternative for DTC brands looking for funding. Still, it may not work for everyone.

Gwella Mushrooms founder, Stefany Nieto, had been seeing a lot of companies in DTC raise through crowdfunding, so she decided to investigate the possibility.

But she found that crowdfunding wasn’t right for Gwella. 

“While we're a Canadian-incorporate company, the majority of our community is currently US-based. The issue with this is that when you're crowdfunding capital through any of these new platforms, you can only raise capital from communities in which you are incorporated. For us, this would likely result in a lackluster crowdfunding campaign,” Nieto says.

Through her research, Nieto also found the fees that crowdfunding platforms charged were not as startup-friendly as she expected, “fees were between $10-$15K in upfront costs, plus 7% of total raised capital.” 

Crowdfunding: the new go-to for community-centric brands 

We’re in the middle of an economic downturn and eCommerce slowdown, but that doesn’t mean that you can’t continue to grow and seek the means to do so. 

Crowdfunding has proven to be a great alternative for DTC brands centered around community and founders who embrace the “build in public” approach. 

Brands like Obvi and CROSSNET have shown that there’s still much opportunity to find capital, even when things may be looking down. So take some of their experience and use it to inspire your own funding and founder journey. We’ll be watching!