Equity Crowdfunding

Equity crowdfunding is a way to connect companies with potentially thousands of investors on a single internet-based platform. But, as it is a crowded and noisy space, there is no guarantee of success. Remember, crowdfunding requires a crowd so you will be advised to ensure you have built your own dedicated following. You will also be expected to have done some pre-selling so that at least circa 25% of the funding target is already committed. The crowdfunding platforms may not list you unless you have some pre-agreed investors to the campaign.

 

This is potentially an alternative to a business angel and venture capital investment, primarily due to the volume of investors that can make up a deal. But it could be a means of attracting angel investors for the future if individuals want to offer for a larger stake.

 

Remember, equity funding is potentially very expensive as a way of raising money and therefore you shouldn’t offer more equity than is necessary. It has been very successful for some food and drink companies, not least brewers who have built a large brand following.

 

There is no requirement to pay dividends. Often people invest through crowdfunding as they hope to see dramatic ‘capital’ growth. The crowdfunding platforms are keen for companies to try and raise across more than one funding campaign. Therefore it is worth considering exactly how the funding will deliver growth (capital equipment, stock builds, communication campaigns).

 

The message you can deliver to potential investors is limited so a business plan and financial forecasts will be needed, and often a video is required to summarise the opportunity. It costs not just money in fees but time and effort to give the campaign the best chance.