March 24, 2023
You’re a founder, you’ve made some good early traction, and now you're exploring how you can accelerate growth by taking on investment. You may be considering equity crowdfunding, and for good reason!
Equity crowdfunding is a relatively new way for startups and early-stage tech companies to raise funds for their businesses. It is a type of crowdfunding that allows investors to purchase shares in a company, providing them with an ownership stake in the business. Whilst equity crowdfunding has some amazing benefits for the raising company, you should consider very carefully if it is the right strategy for your company.
Equity crowdfunding is a type of crowdfunding that allows investors to purchase shares in a company, providing them with an ownership stake in the business. This is different from other forms of crowdfunding, such as donation-based crowdfunding or reward-based crowdfunding, which do not offer investors an ownership stake in the business.
Donation-based crowdfunding involves individuals or organizations making donations to a cause or project without receiving any tangible benefits in return. This type of crowdfunding is often used for charitable causes or social impact projects. Gofundme is one of the biggest platforms for donation-based crowdfunding.
Reward-based crowdfunding involves individuals or organizations contributing money to a project in exchange for a reward or perk. These rewards can range from a simple thank you note to early access to a product or service. Reward-based crowdfunding is often used by creative projects or product launches. Kickstarter is a popular reward based crowdfunding platform. Check out this tent designed to fit onto Teslas! They’re using Kickstarter to raise funds in return for sending backers one of their tents.
Equity crowdfunding, on the other hand, involves investors purchasing shares in a company, providing them with an ownership stake and potential returns on their investment. Another key difference between equity crowdfunding and other forms of crowdfunding is that equity crowdfunding is subject to regulation by securities laws. These laws are in place to protect investors and ensure that companies comply with certain disclosure requirements.
Planning and executing a crowdfund well is no small undertaking, and should be treated with the same detailed consideration as any other promotional campaign. Crowdfund’s require significant time and potential financial investment, but the general steps to success can be broken down as follows:
A cloud phone system for Salesforce, RocketPhone, has already raised over $4 million and has now opened their equity crowdfunding campaign hosted by the Seedlegals platform. RocketPhone CEO Muj Choudhury gives his reasons for electing to launch a crowdfund “For too long the typical fundraising cycle has remained unchanged. Seed Round > VC Backed Series A > VC Backed Series B, all the way to IPO. For an individual like you and me, it’s near impossible to join this fundraising cycle and share in the extraordinary wealth generated when tech companies successfully exit.”
Ortharize is an award-winning business travel platform that rewards staff for being price savvy and enables organisations to calculate their carbon footprint. With £117K turnover in FY '22, they are now raising to fuel their commercial expansion in a market forecasted to grow to $1.5 trillion by 2025.
The UK's leading specialist property project lending platform. Our mission is to unlock the potential of small and medium sized property developers to build more, much-needed and under-supplied homes by transforming property finance.