As of today, Title III of the JOBS Act went into effect. Small companies now have the opportunity to offer up part of their equity to non-accredited investors, namely those of us with a net worth less than $1 million or earning less than $200,000 per year. For fans of the company in question, it’s like buying into a Kickstarter campaign but in return you get a tiny slice of equity instead of the future promise of product and a T-shirt.
SlingFin is one of the first outdoor companies to jump on the equity crowdfunding train. Partnering with Wefunder, SlingFin plans to offer up to $1 million worth of stock to anyone who wants it. If you believe in the future of Slingfin, you can now invest anywhere from $100 to $100,000 in the company, depending on your annual income or net worth.
Funds raised in the SlingFin Wefunder campaign will be used to boost SlingFin’s factory order sizes and take advantage of volume pricing. This inventory increase will allow the brand to expand their dealer network and solve the repeated challenge of running out of inventory and losing out on sales. In addition, the brand plans to grow marketing efforts beyond customer word-of-mouth and add a patented hard-shell backpack design to their product offerings. “SlingFin is in the position that they have enough orders for their tents, but they need financing so that they can afford to stock the tents that they have designed. Now, instead of bankers, the people who actually want to use the tents can invest in SlingFin,” says Paul Kramer, a 30-year veteran of the Outdoor Industry, founder of Mountain Hardwear and current investor in SlingFin.
As a former investor myself, I am in two minds about crowdfunded equity. On one hand, it’s a great way for small companies to gain easy (though expensive) access to capital, but on the other hand, that’s all they get versus working with investors like Kramer who can help on the business side–it’s what we call “dumb money.” And from the perspective of those investing their hard earned money, you have no protections as you would an institutional or even accredited investor, not to mention you will be the last one to get paid regardless the outcome, if at all. The onus is on you to do your due diligence on the company you are investing in, if information is even made available to you. So all in all, it’s pretty high risk.
Regardless, I am curious to see how this plays out over the next few years.