Is Equity Crowdfunding a Match for Your Business?

By Marc Zorn on October 8, 2014,
You need capital. Your business needs money. If you ask 100 entrepreneurs what the best way will be for your business to raise the capital it needs, there’s a good chance that you’ll get 100 different answers. The best advice is to run lean and mean for as long as possible, but eventually your time will be up. You’ll need some cash and you’ll need it fast.

Because of this need, many businesses are turning toward equity crowdfunding as a way to raise the capital they need. Is it right for you? Surprisingly, the answer might actually be “No.”

 

equity-crowdfunding

There Are Three Different Types of Equity Crowdfunding
Equity crowdfunding is a lot different than reward-based crowdfunding. Instead of receiving money to develop and then deliver a reward, investors are actually receiving a pitch through a term sheet for your business. What does this means for you? It means you’ll need to select one of three different equity fundraising types.

• Equity I: In this version of equity crowdfunding, you’ll only be able to market your business to investors that are accredited. They’ll be able to view your investment opportunity privately on a password protected platform. You can raise an unlimited amount of capital from accredited investors in this method and it doesn’t take the fundraising public, but it diminishes the amount of potential investors.
• Equity II: This version of equity crowdfunding is based on Title II of the JOBS Act. Enacted in September 2013, a business can publicly advertise that they need capital. Unlimited funds can be raised through a crowdfunding platform, but once again, these investors must be accredited. It’s more open and transparent, but the benefit is that you’ll get your business pitch in front of almost 8 million investors at once. The downside is that everything becomes public record.
• Equity III: This form of equity crowdfunding is expected to be authorized in the US in the near future. It will allow for virtually anyone to invest into a business because unaccredited investors will be authorized. Your business will be allowed to offer securities online, but because there will be more accountable investors, more time will be required to navigate the regulatory requirements of the capital raised.

For many businesses, this means a solid business model must be in place to handle the maze of regulations that come from any investment. If you don’t have one in place yet, then equity crowdfunding isn’t for you until it is. You’ll also need to have a private placement memorandum in place, which means you need a lawyer on retainer. If you don’t have one or can’t afford one, wait until you do.

Do You Truly Understand Your Audience?
Crowdfunding is used to throw ideas out at the general public to see if they stick. The only problem is that this causes some businesses to waste their time on an idea that won’t be supported. If you take the time to understand your audience and know what it is that they want, then your equity crowdfunding campaign will have a better chance of achieving the results you want to see.

If you’re not prepared, an equity crowdfunding campaign that is successful could put you out of business instead of help you grow it. Use this information to plan your next campaign and you’ll see better results – guaranteed.

Source :

http://www.visionlaunch.com/is-equity-crowdfunding-a-match-for-your-business/

 

 

Tags: , ,

HEADLINE NEWS

U.S. News & World ReportNo Cash for Hate, Say Mainstream Crowdfunding FirmsU.S. News & World ReportThe block on mainstream crowdfunding is just the latest blow to far-right activists operating online. In the last 24 hours, neo-Nazi website the Daily Stormer had its domain regi [...]

Global Crowdfunding Market 2017-2021PR Newswire (press release)Global Crowdfunding Market 2017-2021, has been prepared based on an in-depth market analysis with inputs from industry experts. The report covers the market landscape and its growth prospects over the coming years. The rep [...]

Crain's Cleveland Business'Smaller' gifts can go long way for Clinic's crowdfunding platformCrain's Cleveland BusinessFor an institution accustomed to securing multimillion-dollar donations, Cleveland Clinic's latest fundraising effort has some relatively [...]

NewshubWoman born without vagina crowdfunding surgeryNewshubThe family of a woman born without a vagina has started a crowdfunding campaign to receive reconstructive surgery. Kaylee Moats, from Arizona, lives with Mayer Rokitansky Küster Hauser syndrome (MRKH) meaning she has no cervi [...]

ForbesWhat Works In Equity Crowdfunding -- Insights From ResearchForbesAs we have recently celebrated the fourth anniversary of the signing of the JOBS Act into law, it is a good time to take stock of the effect that the legislature had on equity crowdfunding in the United States. It [...]

Technical.ly BaltimoreArbit took to crowdfunding to seek out investorsTechnical.ly BaltimoreThe Baltimore-based social polling company is seeking to raise a maximum of $425,000 through equity crowdfunding, a funding instrument that was first officially made available last year with re [...]

ForbesMoney Makes Small Businesses Go Round: Ensuring Access For AllForbesIn 2008, a new form of financing — rewards-based crowdfunding — premiered. With money raised on crowdfunding platforms like Indiegogo and Kickstarter, startups and companies with a new product idea connect direc [...]

Baltimore Business JournalCrowdfunding initiative for women-owned startups comes to MarylandBaltimore Business JournaliFundWomen, a crowdfunding platform dedicated to helping women-led businesses find support, is launching in Maryland in partnership with the incubator Betamore, PNC Ba [...]

CNETKickstarter alternatives: Choosing a crowdfunding platformCNETCrowdfunding, a compelling way to raise funds and generate buzz for a new entrepreneurial endeavor, is almost synonymous with Kickstarter. While Kickstarter is a major platform, several other crowdfunding sites are wort [...]

SiliconBeatPayPal, crowdfunding sites cut off white supremacists, hate groupsSiliconBeatPayPal and some crowdfunding sites have joined other tech companies in cutting off hate groups after the deadly white supremacist rally in Charlottesville, Virginia, over the weekend. The Southern [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |