How to seek equity crowdfunding for your company in 6 steps
Embarking on an equity crowdfunding campaign is an exciting journey, but it’s one that involves several key steps. From crafting an enticing business plan to partnering with experts and choosing the right platform, the path to successfully raising capital from a diverse pool of investors is paved with essential actions. In this guide, we’ll walk you through the critical milestones of an equity crowdfunding campaign, demystifying the process to set you on the road to financial success.
1. Develop your business plan or project pitch
Your crowdfunding pitch is a crucial part of attracting investors on a funding portal. Show you’ve done your research on market trends, financial projections, and the need for your product or service. Show investors why you need funding and what you’ll use it for, whether it’s launching a new business or raising capital for a particular project or expansion of your company.
2. Work with experts to structure an offering
Financial advisers, lawyers, and other experts can help you determine the types of securities you will offer, the terms of the equity, and the valuation of your company. Legal experts can also ensure you structure both your company and the offering to meet equity crowdfunding legal requirements.
3. Sign up through a registered equity crowdfunding platform
In the US and other countries, only certain platforms are registered with regulators to allow investments from non-accredited investors. Review their terms, their popularity with companies similar to yours, and their unique benefits to ensure you choose the right platform for your needs. These registered equity platforms include Fundable, StartEngine, and UK-based Crowdcube, among others.
4. Submit essential information
The funding platform you select will ask you to provide information for background checks to ensure that you are not disqualified from using crowdfunding under the SEC’s Bad Actor rules. You will also need to submit financial statements, business plans, and forecasts for prospective investors to review.
5. Launch, promote, and collect funds from your campaign
Once you’ve launched your funding campaign, share the news with customers, suppliers, family, friends, and other potential investors. When you’ve hit your financing target (or your campaign ends, depending on the platform and your offer’s setup), the funding platform will undertake a final vetting process before releasing the funds to your business. They’ll also take a fee for handling some of the legal and processing duties on your behalf. This charge may take the form of a percentage of the funds raised, transaction fees, or equity, depending on the platform.
6. Distribute equity and execute your plans
When your funding goal is met, your company will issue equity to backers based on how much they invested. You can then use the capital you’ve raised to launch your business or expand. You’ll update your investors about your progress and, depending on what happens, you may issue dividends or other payouts if the company becomes profitable or is sold.
As your campaign gains traction, the dream of funding your business or project comes into focus. Leveraging the support of investors who believe in your vision, you’ll reach your financial target. With the assistance of the chosen crowdfunding platform, the final vetting process unfolds, releasing the funds and propelling you toward realizing your business aspirations. Equity distribution, execution of your plans, and investor updates await, promising a future where success and profitability align. Your equity crowdfunding journey concludes, but the next chapter of your business’s growth has only just begun.
Source: Shopify
