Equity Crowdinvesting is a crowdfunding rose of a different color, and while it shares many elements of donation or reward crowdfunding, its nature as a capital investment means it comes under securities laws in the country of origin. In essence, crowdinvesting is equity-based crowdfunding. With crowdinvesting the investor moves beyond simply supporting start-ups, and becomes an active player in the future of that project. Equity crowdfunding means an investment through a crowdfunding platform, usually for a startup or early business, in exchange for a piece of the business. It is hoped by both the investor and the business owner that the value of the business, and the value of the equity investment, will grow over time.
The popularity of crowdfunding of all types has put the pressure on governments to try and regulate the practice, especially equity crowdfunding. Capital investment has in the past been made with large sums of money by big corporations. Securities and investment law has been set into place regulating what should be done on both sides of the investment equation. There have been laws about who can solicit investments, how much, how much an investor has to have in order to invest, and similar. All of these laws are designed to protect both parties.
But equity crowdinvesting is different in that it allows, and is usually comprised of, the small investor with little to give and little to lose. The regulatory burden is significant, and involves financial statements, prospectus, and other documentary evidence suggesting the business is sound. This degree of regulatory requirement is in general not reasonable for the startup business – but there are certain reliefs in some european countries. So the new crowdfunding platforms that are offering equity crowdfunding are a new option for small investors who were previously not allowed into the market, and startups who had to find other ways to raise capital. These types of business investment also come with significant risk for capital loss. Continue reading
Crowdfunding is an excellent resource for hopeful entrepreneurs, with the potential for providing start-up capital for new businesses. It is a highly visible way to market your company and your ideas. However, there is a downside as well: a failed campaign can also mean bad press for your company. In order to avoid these downsides, have a look at our Crowdfunding Advice in this Blog. A vital step before jumping into the crowdfunding waters is to do your research first. The most common mistakes that cause new ventures to fail include:
- Lack of research and planning
- Financial mismanagement
- Poor hiring and leadership practices
Research and Planning
You need a solid business plan and a good working understanding of what your target market wants. You need to understand the value of your own product and how to communicate that value to your potential investors and client base. To garner the initial start-up funding you need with a crowd-funding campaign, you can’t just assume you have supporters out there—you need to identify and target your supporters. A professional investor pitch story is critical – why do you need funding, why should investors fund you, what separates you from your competition, what makes you unique and special? Will your product contribute to economic growth? Continue reading
The most important part of any crowdfunding campaign is getting people interested enough to invest. Anyone can launch a campaign, but you need people’s attention in order to succeed. Use these crowdfunding tips in order to attract more investors.
Have a Clear Plan of Action
Don’t start a fundraising campaign on a vague idea. People want to know that you are serious. They want to know whether your project has any chance of success and whether or not you know what you are doing. Lay out a clear plan of action for potential investors to see.
Focus On Benefits
Let investors know what’s in it for them. Focus on how they will benefit from rewards or equity. Don’t make it all about yourself and your project.
Enhance your Social Media Presence
Create new social accounts (if needed) and engage “multipliers” where investors and the media can get information about your project. Include your plan, any endorsements, images that journalists can use, etc. This will make it easier to attract funds and publicity.
Create a Video
Having a video that will showcase and explain your project is extremely powerful. It’s also a great marketing tool and a chance to get your pitch out there. However, remember that a poorly created video is worse than no video at all. If you can’t afford a professional video, skip it (or ask us). If you can, do it and put it up on your webpage and link to it from your social profiles.
Want to launch a crowdfunding campaign but not sure where to start? Contact us today for help!