Crowdfunding is a form of funding where start-ups or small business owners fund their project with contribution from a group of individuals. This is quite different from the process of raising funds from banks, venture capital firms or angel investors. Equity funding allows start-ups to raise funds in exchange for their company shares to their investors. The shareholders benefit when the company makes profit and grow along with the company. This chance to get a percentage of ownership in exchange for financing a business makes it an enticing proposition for the investors. The same theory when applied to crowdfunding is equity crowdfunding where the different group of individuals who provide the funds take a share of the equity in return.
What to focus on
- Create a business plan or model to tell your investors that you are serious about your venture. Also, the fact that you have conducted the required research to come up with approximate amount of equity funding needed to achieve your fund raising goals.
- The progress your company has made can also be an important aspect in your favour. By showing the growth of your business, you can win the confidence of your investors and can ensure them that your business is on the path to success for the future as well.
- If your company possesses any patents, sharing their details with your investors is a great idea. A patent will also put your mind at ease when sharing your idea on the internet with thousands of potential investors.
- The success of a business also depends a lot on its management team. When your investors know that the key members are capable of delivering the promised results, they are happy to invest. A seasoned team can inspire the confidence of investors, just like entrepreneurs with previous successful exits.
Equity crowdfunding is different from traditional crowdfunding. This in the sense that people who fund a equity Crowdfunding business or project receive shares in return. Crowdfunding otherwise can be donation based i.e., investors do not expect financial returns for their fundraising initiatives. It can also be reward based crowdfunding, where individuals who contribute get some reward in form of a product or service.
Equity crowdfunding benefits
It is the best option if you want to raise more capital. Even to attract serious investors than donation or reward-based. This is one of the best methods of crowdfunding a business. Mostly because it can be used as a platform to present your business ideas to potential investors from your network. Especially those who are eager to invest in start-ups that show promise of success.
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