Even the greatest idea ever conceived meant little until it became a reality. Transforming these ideas into a functional business requires hard work, commitment, passion, and, of course, a great deal of capital.
Raising capital – A love/hate reality
Despite being a vital component of any company in its infancy, accumulating capital is an area most founders lack experience in. As the founder of your business, your main focus is building your company, not fundraising. Right?
Not necessarily. Without proper funding, you risk more than economic stability for your company. You risk momentum.
Fortunately, we live in a time where you have more options than ever to fund your young company. Among those options are the more traditional avenues such as a loan from a bank or family member. However, a newer, more contemporary approach has gained popularity and success in recent years: equity crowdfunding.
What is equity crowdfunding?
Equity crowdfunding (what’s sometimes referred to as investment crowdfunding) is a way for investors to invest in a company and gain either ownership, or a promise of future returns. Rewards-based crowdfunding, on the other hand (common to sites such as Kickstarter and Indiegogo), provides investors with certain kickbacks or rewards for contributing.
Since its inception, equity crowdfunding has proven to be a powerful marketing, fundraising and engagement tool in line with contemporary technologies, behaviors, and investors’ mindset.
Ideally suited for startups and young companies
Indiegogo Cofounder Danae Ringelmann is quoted as saying; “We don’t see crowdfunding and venture capital as mutually exclusive.”
There is certainly truth in this statement. In fact, crowdfunding can help pave the way toward landing a highly engaged venture capitalist down the line, which is why so many startups are choosing this funding channel. That’s because with crowdfunding, you’re given the opportunity to sell your idea direct to the consuming public.
The success of your crowdfunding campaign can help future investors assess the demand for the product in the marketplace, thus removing some of the risk involved in their investment. In other words, a successful crowdfunding campaign is likely to make your company more attractive to investors in the future, as you seek further funding.
However, the benefits of equity crowdfunding go beyond the world of startups. This modern approach to funding a company offers much more than more traditional methods possibly can. Take, for example, the ability to tell a story, procure growth funding or even finance an acquisition. The possibilities are much more broad and deep than many outside the industry have given credit.
Sell your pitch in one fell swoop
As you look to raise funds for your company, you’ll likely create a variety of marketing materials, such as videos, downloadable documents (financial projections, for example) and more.
In this age of instant access and mobile-friendly viewing, it’s vital that you make it easy for potential investors to gain access to your “story” without committing too much time or effort in the process.
The traditional approach to raising funds no longer gels with modern-day business, where computer screens outnumber reams of paper. Nobody wants to be inundated with packets, folders, or even emails. They want to have one site where they can access information and learn whether your idea is worth investing in.
Enter crowdfunding, where rather than create endless amounts of costly kits and packets that are often ignored, you’ll simply compile your materials into one, user-friendly crowdfunding page.
Better yet, as your campaign grows and evolves, so too can your crowdfunding page. Making changes to a web page is vastly superior to having to reprint a press kit.
Gain easy access to a wider audience of potential investors
Before the JOBS Act was enacted, startup founders could not discuss raising capital with complete strangers. This severely limited whom you could solicit. While that might have been a viable approach before the Internet, today it’s grossly outdated.
Luckily, times have changed. By choosing to raise capital through equity crowdfunding, entrepreneurs can pitch their ideas to a growing number of accredited investors without committing the time and cost to traveling.
Merge your audiences into one “super-audience”
All startup companies need three types of people on board:
- Passionate supporters
In the past, these three groups of people were mutually exclusive. That proved to be cumbersome and prohibitive. You’d approach a bank or family member solely for the funding, and then would spend hours convincing hordes of friends and neighbors to evangelize on your behalf. Finally, you’d schedule a separate and large chunk of time into developing a market strategy designed to identify and capture your customers.
Three separate projects eating up valuable time and resources.
With equity crowdfunding, however, the lines have blurred. Investors become supporters. Supporters become customers. Your contributors want to see your business succeed, so they actively market on your behalf.
Everyone’s on the same team all focused on the game goal. And your crowdfunding page is the scoreboard, keeping track of your successes; serving as a platform that encourages excitement and anticipation.
Adaptable, versatile, and compliant – Equity Crowdfunding for the 21st Century Business
The business of business is constantly evolving. Technologies, cultural shifts, and innovative concepts redefine how we create, run, and grow our companies.
While crowdfunding has long been an avenue of choice for companies looking to offer rewards for investments, it’s also proven to be a worthwhile tool for equity investments.