A check on equity-based crowdfunding
Georgia was one of the first states to open a complicated regulatory loophole back in 2011, which allowed residents to buy into local businesses–just like buying shares on the stock market. It took a few more years before the promise of “equity-based crowd funding” took hold.
But in 2013 it did, and the concept is partly the reason you can now find a Bohemian guitar on the shelves of mass-market music retailers, or in the hands of big-name performers–drawn by the unique sound and look of a metal oil can, which makes up the guitar’s body.
Shaun Lee, co-founder of Bohemian Guitars.
Rising to this level of success has taken a lot of initiative and sweat. After all, only a few years before, Shaun Lee and his brother Adam were running Bohemian’s office, assembly line and warehouse from their dad’s basement. But Shaun had big plans.
“Initially, I was like, ‘We’re going to build guitars, bases and ukuleles,’” he says. “And I quickly realized, ‘Let’s get one product perfect.’”
A successful Kickstarter campaign pulled them from basement to bigtime. And after a several years of tinkering and adjusting, they now consider their guitar “perfection.” Both brothers feel it’s a good time to expand, which is why Shaun’s dream of a bass and ukulele is becoming reality.
At an Atlanta launch party recently, several versions of each sit on display. Lee encourages folks to pick one up and try it. He hopes they’ll be so captivated, they pluck down cash and pre-order one of Bohemian’s new instruments without hesitation.
For the brothers, it feels good to be here. But getting to this point meant taking advantage of lots of opportunities, including on equity-based crowdfunding, Two years ago, when the brothers signed on, it was little more than an unproven concept. In just a short time, Bohemian Guitars became the poster child for the movement.
“We had this really great title,” Shaun says. “We were the first company to raise funds in this manner in… decades.”
It’s actually been nearly eight decades. After the Great Depression, federal regulations largely prevented the non-affluent from buying equity in small, local businesses. But that little-known Georgia law, passed in 2011, made it possible for any state resident to invest, just like the high rollers.
“There was a lot of energy and a lot of buzz that got generated from that campaign,” says Jeff Bekiares, whose Atlanta startup SparkMarket helped raise Bohemian $200,000 in equity-based funds.
It was a lot of money. But it wasn’t easy money.
Sparkmarket folks spent a lot of time explaining the concept, says Bekiares. And there were some serious, potentially costly things to consider. For example — redoing bylaws, choosing whether to offer a preferred rate of return in order to woo investors, or deciding if shareholders get a vote on important decisions.
“This scares a lot of businesses, because they think to themselves, ‘I’m going to have 50 new investors. I already have a hard enough time managing my friends and family who are owners of the coffee shop,’” says Bekiares.
A Bohemian guitar made out of the company’s signature oil can.
Those barriers, he believes, are why Georgia’s only seen about 50 or 60 equity-based crowdfunding attempts. Bekiares says you can count on one, maybe two hands the number of successes. Still, he remains the concept’s biggest cheerleader, and points out how equity based crowdfunding continues to gain steam. gaining broader support.
“Two years ago ,there were only two states in the Union where you could do this,” he says. Now, 28 states allow it.
Looking back–with ukulele in hand–Bohemian Guitar’s Shaun Lee says the exposure of launching with Sparkmarket made sense.
“But was it the best way to raise money? Maybe not,” he says.
That’s why the brothers are back together again with regular old crowdfunding. For the next phase of their business, they’re raising money one Indiegogo supporter, and one ukulele, at a time.
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