Mike Bell wants restaurants to flip the script on how they flip fries.
Flippy is “an overhead robot on a rail that installs over a fry station and takes over all frying operations for quick-serve restaurants,” Mike explains.
Miso anticipated an impending labor shortage long before the pandemic, particularly in the fast food industry. Now, the company’s solutions are well-suited for a full-fledged labor crisis.
Thankfully for Mike, that’s led to even more interest in products like Flippy.
A manufacturing warehouse might need a small number of robotic arms to function, but there are thousands of locations per restaurant chain, throughout the U.S. and the world. Naturally, Flippy caught the eye of many quick-serve restaurant chains looking to offset the labor crisis.
That massive market and low cost of entry ($3,000 per share) look like dollar signs to crowdfunding investors. Miso Robotics raised $60 million across Series C, D, and E rounds just from crowdfunding.
On an episode of the How I Raised It podcast, Mike breaks down what crowdfunding looks like for Miso Robotics, what types of companies can benefit from it, and the advantages of crowdfunding over venture capital.
“The short answer is because we could,” Mike jokes.
Miso raised around $15 million in its Series A and B, but faced a down round (a valuation of less than its prior round) for its Series C. Like many startups, the company hadn’t quite found its product-market fit but was prepared for a new direction with the Series C raise.
Rather than face the critiques of shareholders in a traditional venture setting, Mike thought it was a good time to take advantage of the SEC’s new regulations around crowdfunding.
He found two major benefits to crowdfunding for Miso. One was that thousands of shareholders comprise one entity on the company’s cap table. That means thousands of people only amount to one vote on board matters.
The second benefit: the ways crowdfunding differs from seeking venture investors. Crowdfunding doesn’t use the extensive due diligence scrutiny a traditional venture firm employs. Crowdfunding only requires the company to prove the value of its product (to non-accredited investors).
This initial lack of scrutiny can be advantageous as a company grows.
“I’ve been in those board meetings, where you have to explain why you had a couple of bad quarters,” Mike explains of the difference between venture and crowdfunded shareholder meetings.
“You don't have those anymore with crowdfunding. I have shareholder meetings and they're friendly — and there are just 20,000 people. [I’m] not saying everyone's happy, but it's just a different environment [in which] to run a company.” So far, 20,000 people are convinced of Miso’s worth, putting up around $3,000 each. Each investor has a low barrier to entry, but the payoff for the company is huge.
Why not crowdfunding?
Mike admits that crowdfunding is not a one-size-fits-all solution.
“It's not a good fit for a lot of companies, especially a lot of tech companies,” he says. “You need to be able to tell the story really simply and really clearly. And it needs to resonate with people.”
For Miso, it’s easy to demonstrate the benefits of Flippy — and the market needs. Potential investors (and buyers) can watch a quick demo of how the product works, and there’s very little question about its use. So for B2B companies, as well as those offering complex solutions that require a lot of explanation, crowdfunding may not be the best fit.
Best practices for raising with a crowd
Here are Mike’s tips for running a successful crowdfunding campaign to raise your own round.
- Pick your platform: There are many crowdfunding apps to choose from. Miso Robotics uses the Wax Invest platform. Shop around to find which one makes the most sense for your company and its goals.
- Don’t skimp on a marketing budget: Crowdfunding isn’t an “if you build it, they will come” proposition. Investors arrive only if you draw them in. Miso uses a mix of a PR team, social media marketing, and media buyers who spread the word about crowdfunding efforts. And while you’re planning marketing strategies, make sure they sync with the timing of your crowdfunding campaign(s) to build momentum.
- Hang around the watering holes: Target the websites and newsletters that go out to your best-fit prospective investors. Add in a healthy press release schedule, and you’ll get attention.
- Watch your language: The SEC has strict rules and regulations about what you can and can’t say to entice investors. Work with a lawyer familiar with crowdfunding to make sure the words you choose don’t violate the SEC’s terms and ruin your round.
Nathan is also the CEO of Fundingstack.com which is a new platform for VCs and investment bankers to both raise capital and assist clients and portfolio companies.
Users of these platforms have raised over $9.7 billion since 2016.
This article is based on an episode of Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders raise money.