Business financeCrowdfundingEquity Investor Crowdfunding

Equity Financing Through Crowdfunding | 7 Things You Need To Know

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We are still in the early infancy of alternative funding options like equity finance through crowdfunding. If you don’t believe me you only need to search google keyword planner. However, I believe that crowdfunding whether its from rewards, equity or debt. Is in fact the future for the next entrepreneur generation.

Just stop for one minute and take a look around you. I bet you it will not be long before you see a person with their head in their iPhone. Chatting along using Instagram, Snap Chat etc.

It’s a fact

The next generation are already growing their social following. Just ask your son or daughter how many contacts they have in their social network! You may be surprised.

In today’s article we are going to discuss 7 things you should know about equity finance through crowdfunding.

Equity Finance Through Crowdfunding

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Investor 20%

1. Investor

So, let’s start with the investor, unfortunately at this stage of the game the majority of platforms offer little or no means of negotiations for investors.

Also as we discussed in my last article there are two main models for equity finance through crowdfunding, entrepreneur led and investor led. While there are business owners still using alternative ways to find investors. This  will lead to a reduction in the number of investors for equity crowdfunding.

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Progress 40%

2. Progress

As more and more entrepreneurs start to see the benefits that crowdfunding offers and choose it as their preferred option. Only then will it start to attract a new generation of investors.

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Duediligence 58%

3. Due-diligence

I hate to tell you but around 85% of the people that apply to platforms are unsuccessful. They fail to pass the strict due-diligence process. If you want to take a closer look you can review the due diligence set by Crowdcube.

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4. Platform

Over this crowdfunding article series, you have read various eligibility criteria for different platforms. WendyKipling.com works with selected partners as and introducer. If you want more information about these check them out.

Make sure you meet the platform criteria first before you apply. This will reduce the risk of rejection.

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Public Exposure 80%
  • Secure equity investors
  • Ambassadors for your brand
  • Win new customers

5. Public Exposure

Equity finance through crowdfunding provides a public way to raise capital. However, if anyone wanted to find out if your business had  financial borrowings. It could do so simply by purchasing a set of your latest filed accounts where charges and securities are visible.

Noteworthy, if you need equity funding to grow your business. Chances are you will also need new customers. Equity finance through crowdfunding gives you the opportunity to meet both of these needs at the same time.

Your business will benefit from hundreds or thousands of investors acting as brand ambassadors. It does not get much better than that.

This leads nicely onto your social crowd, do not underestimate the need for your own social crowd. Just be aware WendyKipling.com partners all require proof of social networks as part of their  due-diligence process.

You need to ask yourself the question do you have a crowd? At first you may think that you don’t . However everyone of these types of contacts will form your crowd:

  • Existing customer list
  • Supplier list
  • Professional contacts

For example your Accountant and Bank Manager, both of which will have clients. Do not be afraid to ask to be featured in their monthly newsletter. Discuss the potential of a business feature telling your story. Remember any type of PR will also give their business more exposure. Many banks like to support their customers with sponsorship and PR.

Now that you have started don’t stop, make sure you have a Facebook page and other social outlets like Instagram, Pinterest and LinkedIn.

Start building your community, get creative by increasing your social network. Do not stop until you can demonstrate your business has a substantial social network. Spend as much time as required in developing your social network. .

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Network 90%

6. Your Network of Investors

All your contacts will provide early support and some will even provide investment in your campaign. This in turn will attract interest from outside investors who have not heard of your business before.

One thing that most platforms fail to tell you. They do not have a large enough investor base to rely on to fulfil all your investment needs. In many cases they will require at least 20% of your investment requirements to be secured. This will be a stipulation before you will be able to start  your campaign.

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Timing 100%

7. Timing

The last thing you need to be aware of is timing. It will play a key role in the success of your campaign. If you decide to launch your campaign when everyone is on holiday. This will have a serious effect on the success of your campaign.

Finally

Many entrepreneurs underestimate the time and committed that is required. Should a business want to raise money. Whether its crowd equity or another type of business finance. You will have to invest the time and resources if you are serious about securing funding.

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