Equity Crowdfunding Demystified – Part II
With equity crowdfunding, you raise funds from private investors by offering unlisted shares in your company. This model is different from offering investors shares of a company listed in the stock exchange. You need to register with the SEC to participate in such equity-based fundraising. Offering shares in your business to would-be investors isn’t the only crowdfunding solution. There are ways to reward investors through crowdfunding platforms without giving up portions of your business.
Debt crowdfunding is a hybrid solution between traditional crowdfunding and small business loans. With this business financing type, the loan is from a crowd instead of online lenders or financial institutions after signing a loan agreement. You repay the money borrowed with interest, over a number of months, as per agreement. No shares of your business are required for funding.
Donor crowdfunding or donation-based crowdfunding, is a process involving people who contribute to a cause without expecting any returns. Friends and family members donate funds to support the dream of opening a new business. Non-profit organizations and charities prefer this crowdfunding mode to solicit donations from supporters to the cause. Some online platforms available for donation-based crowdfunding campaigns, are GoFundMe, CrowdRise and Fundly.
Crowdfunding which is rewards-based is a fundraising option appealing to entrepreneurs who avoid debt that needs to be repaid. Here contributions are taken from financial backers in lieu of benefits as a trade-off. The rewards offered to contributors can be as simple or complex like copies of books before publishing or a massage therapist rewards donations with gift certificates for future services. A trial and error process helps to find suitable rewards to motivate people to share and support your compelling vision. Some entrepreneurs offer an array of various rewards which could be of value to the donor for the amount the supporter or well-wisher contributes. This is a trial and error process!
Equity Crowdfunding Sites
As the SEC regulates and looks over equity crowdfunding, you have to utilize an SEC-mandated funding platform to solicit funds from the public in lieu of your company’s equity. Despite regulatory hurdles, a number of equity crowdfunding platforms are available. You review several sites to assess options that ensure the best fit. Some great equity crowd-funding sites are: CircleUp, Republic, WeFunder, Fundable, StartEngine, Netcapital, MicroVentures, Mainvest and SeedInvest
Pros and Cons of Equity Crowdfunding
Equity crowdfunding is a business funding solution if unable to access funds due to revenue limitations, credit issues, or lender requirements issues. Without debt to repay and interacting with numerous investors, you could raise more money. Business owners structure crowdfunding campaigns to retain more business equity and offer small portions to investors. You attract non-traditional investors to support business goals, gain visibility and build support before launching the business. You share a portion of the company’s future profits for cash injection now. As per SEC guidelines, you disclose the company’s financial details to every potential investor, online. The risk of public failure exists if your equity crowdfunding campaign bombs. Equity crowdfunding platforms charge fees and retain 5-15% as commission. Traditional investors refrain as it’s tough to resell shares of small companies without being financially hit. Crowdfunding campaigns are time-consuming, without any guarantee of securing funds to make the energy and time spent, worthwhile.
More in Uncategorized
City Wars! Which Popular City is the Best to Own a Million Dollar Home in?
When buying real estate, any home buyer would want the largest square footage for their buck. So what sorts of an...July 6, 2022
The Ultra Wealthy Want Their Privacy and They’ll Do Anything to Get It
Ultra-rich rapper Nicki Minaj in her pink Lamborghini worth $400,000 or celebrity entrepreneur Mark Cuban stepping out from his private jet worth $40...July 1, 2022
Equity Crowdfunding Demystified – Part I
As a small business owner, securing funds for your start-up is challenging. Less than 1% of start-ups secure funds from angel...June 30, 2022
This is The Situation of American Indebtedness at Every Age
It is said that once born as a human being, you can never escape Debt and Death. How true when at...June 29, 2022
Celebrities Who Take the Term ‘Neat Freak’ to a Whole New Level
When obsessive and/or compulsive preferences are disturbed, it might annoy the individual, but not actually cause any unyielding or extreme anxiety, as is...June 28, 2022
What’s a Crypto Wallet and Do You Need It?
Technically, you don’t keep coins in cold storage or download hot wallet programs to your desktop. Many crypto-exchanges now allow storing...June 27, 2022
Hollywood’s Plastic Surgeons Admit Business Boomed During Lockdowns
Nobody knows they had it done Celebrities got liposuction, nose jobs, and invasive procedures done, when the lockdown cancelled performances. Invasive...June 24, 2022
Getting Yourself a Mortgage is Easy with These 8 Steps
A red-hot housing market and rising mortgage rates complicates home-purchase processes; be prepared and study the mortgage process before home shopping....June 23, 2022
Some Wildly Successful Crowdfunded Start-ups that Had Us Surprised
A successful crowdfunding campaign can take your business to reach the next level and some start-ups whose crowdfunding campaigns managed to...June 20, 2022