Is Equity Crowdfunding for everyone?
Equity crowdfunding sounds like a perfect way for startups to get some quick cash in their pockets, but is right for everyone?
There are several advantages to this new way of raising capital:
- Equity crowdfunding is a simple, low cost and efficient way to raise capital. The process of raising funds on an equity crowdfunding platform is simple and usually follows a clearly defined timeline. The cost to set up a campaign is low compared to raising capital through other forms of funding. Equity crowdfunding is efficient because firstly, it is an online market which means that investors come to the company, instead of management wasting valuable time speaking to and chasing multiple investors seperately. Secondly, it is a standardised investment process so it reduces the inefficiencies and complexities that are associated with traditional funding options.
- Equity crowdfunding in essence combines marketing with fundraising. An equity crowdfunding campaign will allow you to gain insights into what marketing strategies will be the most effective. On top of that, companies are promoting their business to a new audience (as well as their existing support base). By linking the chosen equity crowdfunding platform with your social media accounts is a great and cost saving way to spread the word about your offering and help you gain both money and attention to your product.
- It also creates a loyal customer base. Those who have chose to help fund your vision will not only have a stake in your company’s success, but they also are making a statement that they believe in your business. They will help spread awareness of your company and offerings through word-of-mouth to other likeminded people and in turn this new audience may become investors, customers, or supporters.
- Everyone loves a good success story, the media and the public is always interested in hearing about a dedicated entrepreneur who’s dream was realised by raising funds through directly appealing to the public. It is intuitive to use the success of the equity crowdfunding campaign to build momentum and increase your exposure.
- Lastly, it is relatively easy to do. It certainly requires some effort for you to familiarise yourself with the platform you chose and to also learn the the best techniques to get noticed, but equity crowdfunding can help you turn your idea into reality, especially when compared to all the loops and fences that you have to jump through when applying for a loan or meeting with potential investors.
With that being said, equity crowdfunding might be perfect for some, but might not be for others. It varies depending on the company seeking to raise capital and it is up to the company to find out depending on their offerings, company culture and strategy whether or not crowdfunding is the right fit for them. The most important consideration is that equity crowdfunding requires you to sell a stake in your company to members of the public. It is key that you, and all existing shareholders in your company, are aware of the implications. So if you are unwilling to sell a stake in your company, then equity crowdfunding might not be the right fit for your company.