A wave of Albuquerque tech companies are signing up to let the public get in on the ground floor of their startups as other sources of investment appear to have backed off from making bets during the Covid-19 pandemic.
During a virtual event held Thursday by the New Mexico Technology Council and the New Mexico Biotechnology & Biomedical Association, some tech companies shared their reasons for launching crowdfunding campaigns. EveryDay Contacts, an Albuquerque company offering disposable contact lenses with a hydrophilic coating, is using crowdfunding to introduce itself to doctors, said CEO Lawrence Chavez. He called crowdfunding "a great opportunity for non-accredited investors to participate in the investor world."
Crowdfunding allows people without investor accreditation to make secure stakes in companies. The Securities and Exchange Commission first adopted rules that permitted companies to offer and sell securities through crowdfunding in 2015. Last year, the SEC amended its rules, allowing companies to raise as much as $5 million. The change may allow crowdfunding to present itself as a more viable alternative to venture capital.
Katie Powers, an account manager for crowdfunding platform Wefunder, said “a lot of people looked to alternative routes they could take” for funding in the initial stages of the Covid-19 pandemic. Between the first quarter of 2020 and the same period this year, investment volume on the platform increased from $10 million to $68 million. The period of growth reversed a trend of relative stagnation that had occurred in the couple of years prior, according to data Powers shared during the event.
"We aim to not be a gatekeeper. We don’t want to just become another barrier to entry for accessing funding," Powers said. "Our bar is $50,000 raised and then we’ll work with almost anyone" with a compliance check, she added.
Albuquerque broadband company OptiPulse has raised more than $277,000 through Wefunder since launching its ongoing fundraising campaign in March. The company turned to crowdfunding after struggling to raise venture capital for its venture, which would require a significant, ground-up investment in a new type of infrastructure. OptiPulse has already raised more than $3 million primarily from accredited investors, COO Mathis Shinnick told Business First. The company offers a broadband technology that uses lasers instead of more traditional fiber optic cables.
Crowdfunding could help fill a void left by some angel investors during the pandemic. A survey of angel investors taken in April 2020 found that 71% of angel groups planned to continue to invest, though maybe at lower amounts, according to the Angel Capital Association. Angel investments can be in the amount of tens of thousands or hundreds of thousands of dollars, but some startups have raised even more with crowdfunding.
That was the case for Santa Fe interactive arts and entertainment company Meow Wolf, which raised $1.3 million on Wefunder. Several investors later received notices saying Meow Wolf would buy back their shares, leading to outcry among contributors.
Albuquerque-based advertising technology company AdWallet seeks to also raise more than $1 million with a crowdfunding campaign on Republic. AdWallet pays users to watch ads and will primarily use the money to market to a national member base and hire sales staff. AdWallet previously disclosed nearly $1.7 million in funding, according to a Form D filed with the SEC.
Powers offered some advice to founders who are considering starting a crowdfunding campaign: “Make sure your network is prepped and warmed to this type of [investment] avenue" as traditional investors may not be interested in joining a crowdfunding campaign.
Investor behavior may also be influenced by the size of early contributions, with campaigns raising money from larger contributions at the start being less likely to receive contributions down the road, reported The Wall Street Journal, citing Journal of Consumer Research research.
