Well – here’s a new option.
It’s called Equity Crowdfunding. Heard of it? If you haven’t, think of it like a Kickstarter campaign, but instead of sending people a reward you give them just a few shares of your growing company.
It might sound too good to be true, but it’s real: you can now sell shares of your business to just about anyone, as long as you’re incorporated, your head office is in a participating jurisdiction, you have a business plan, and of course, you’re not doing anything illegal.
You also have to raise your funds on a secure equity crowdfunding platform. And there are rules to this game, which securities regulators like the SEC have set. In the USA, companies can access equity crowdfunding under the JOBS Act, and in Canada it’s called the Startup Crowdfunding Exemption.
If it seems like everywhere you look, doors are closing and you just can’t get the capital you need to grow your business, equity crowdfunding could be your answer.
How Equity Crowdfunding Works
To raise any money with equity crowdfunding, you have to be totally transparent about your company’s performance and finances. If you don’t have a business plan, write one. There’s a legal component too; a securities lawyer can ensure your corporate documents are in order and help you structure your equity crowdfunding offer, including the type and price of shares.
Then you can choose a platform to showcase your company and your equity offer. Look for a platform that offers a lot of resources to help you mount a successful campaign. Just like Kickstarter, you have to have a great marketing campaign to make sure investors know about your offer, so the more support you can get from the platform, the better. Platforms also charge a fee, which could be a flat rate or a percentage of the money you raise.
Know that it will cost you some money to launch an equity crowdfunding campaign (in legal fees, platform fees, and consulting or business plan coaching fees), but it’s so worth it to know that your business is healthy and organized, you have a superb business plan, and you have an excellent crowdfunding platform to help you boost your campaign.
Why is Equity Crowdfunding a Big Deal?
If you’re a startup owner then you know how hard it is to find financing for your business, especially if your company is really new. It’s hard to get bank financing as a new company, because you don’t have many assets and startups are considered high-risk to lenders. Most Venture Capitalists won’t take a chance on a really small company and it’s hard to even grab their attention when thousands of new businesses are popping up all over North America every month.
With equity crowdfunding, you can raise small amount of money from almost any member of the public, connecting your company to capital that simply wasn’t accessible until now.
And once you do, you have direct access to a group of investors who can become powerful ambassadors for your brand.