Robust ThemeDec 09, 2019 2020-04-08 7:40
Crowdfunding: All you need to know about raising money from the crowd
Crowdfunding Helps Game-Changing Ideas Get Off The Ground
Obtaining capital to grow through traditional financing methods such as banks, venture capitalists or angel investors, is a common hurdle for early-stage companies. That’s why founders and
entrepreneurs are seeking out new methods such as equity crowdfunding (ECF) to raise the money needed.
Equity Crowdfunding is not only democratizing the access to startup capital, but it’s also helping to bridge the gap between female and male entrepreneurs and their ability to access capital.
Female entrepreneurs can find it difficult to raise money through traditional channels but for whatever reason, they are not utilizing alternative channels either.
According to a research carried out by the American SBA Office of Advocacy, female-led businesses achieve higher returns
through equity crowdfunding than male-led businesses.(https://www.sba.gov/sites/default/files/advocacy/Crowdfunding_Issue_Brief_2018.pdf)
Yet, only one woman for every five men raises money through equity crowdfunding.
By democratizing the fundraising process and allowing individuals to invest small amounts, equity crowdfunding enables women to broadcast their idea to a wider audience.
What is equity crowdfunding and how does it work?
Equity crowdfunding as we know it is a relatively new form of financing. Through digital platforms, innovative startups can receive investments from a number of investors (the crowd) in exchange for equity.
The US and UK are the leading countries in ECF and since January 2018 Australia is now following suit, with companies such as Xinja, raising A$2.4m through equity crowdfunding platform Equitise.
Xinja the first Australian 100% digital bank, or “neobank" hit the minimum funding target of A$500,000 in less than 18 hours, highlighting the keen interest from the Australian retail investors
to participate in this new form of investing.
In Australia, Retail investors can invest up to $10,000 per company per year meanwhile in New Zealand there is no limit. The minimum investment varies according to the offer and it can start
from as little as $50.
In each year, companies in Australia can raise a maximum of A$5,000,000 from retail investors and in New Zealand up to NZ$2,000,000. In both countries, there is no limit on the amount that can be raised from Sophisticated/Wholesale investors.
Raising money with Equities, a leading equity crowdfunding platform in Australia and New Zealand is a relatively quick and easy process:
1. Early stage companies can reach out to Equitise via the website (www.equitise.com) to express interest in raising capital.
2. The experienced team will then meet with the company and conduct a process of due diligence to ensure equity crowdfunding is the right fit.
3. If the business is a good fit, the team will then help in the process of becoming a publicly unlisted company and prepare all materials for the deal room.
4. Once the campaign is ready, the offer will be launched privately to a select group of potential investors.
5. If the campaign shows enough traction during the private launch, it will be launched to the public and run for approximately 4-6 weeks.
6. If the campaign hits its minimum funding target, Equitise will prepare the documentation to close the round and will transfer the money to the company.
Is equity crowdfunding right for my business?
You should consider raising money through equity crowdfunding if:
- you are developing a game-changing idea or a product that is disrupting a specific industry.
- your team is passionate, devoted and well established.
- your activity is showing a revenue and growth forecast.
- you are a startup and you want to raise series A, B, or between the two, funding round.
- you are ready to dedicate time and efforts to the campaign
Pros of equity crowdfunding
- Simple: compared to other forms of investing, it doesn’t require a large loan or backing.
- Fast: usually a campaign runs for 4-6 weeks
- Attracting customers: helps to raise brand awareness, tapping into a new pool of customers who have the potential to become investors. These investors will be loyal to the brand and be invested in its success
- Friendly: you’re not alone when raising capital. The platform will support you along the way and can even offer guidance in other aspects of your business such as marketing.
Cons of equity crowdfunding
- Standout idea: you really need to be able to showcase the unique and disruptive side of
- Time: while we make the process as quick and easy as possible, time and dedication are required for the best results
- Momentum is essential: throughout the pre-campaign and launch, it is vital the offer gains momentum. This requires a commitment in speaking with your previous or potential
investors, networking and marketing
Equity Crowdfunding tips for a successful raise
If you want your crowdfunding campaign to take off, you need to carefully plan your activities and never lose focus on the timeline.
1. Set the right funding target amount according to your business, raise what you need not what you want.
2. Prepare a comprehensive business plan (including business summary, market analysis, marketing and sales strategy, milestones and history, risk factors) and provide relevant
financial information (business liquidity, capital resources, revenues, and expenses).
3. Explain how you are going to use the capital raised and provide all the information about the campaign such as target offering amount, campaign deadline, share price, equity offered.
4. Frequently communicate with your previous and potential investors during the entire campaign. Keep them informed of any updates and ensure content is fresh and engaging.
5. Plan all the activities in advance, thinking about all the details (website, blog, connections, press release, marketing strategy) to ensure communications are consistent and complementary to your other marketing initiatives.
6. Build integrity and credibility around your brand: be honest and transparent throughout the campaign to build trust with those who are going to invest their hard-earned savings in your brand.
7. Storytelling – your campaign should tell your story, convey your idea clearly and outline why your success is important. Prepare an engaging and dynamic video and use the right images and description to present your idea in the best way.