Know More About Myths Of Equity Crowdfunding
Raising funds from the public through crowdfunding is a type of crowdfunding. That means you, me, and our friends and families might contribute money to aid a specific entrepreneur, inventor, or startup seeking funding to continue working on their innovative business idea.
As more people access the internet, connecting with thousands of people who share similar beliefs has become easy. Support could be a monetary donation to a good cause or financial assistance building your favorite cooler.
You can invest in a startup in exchange for equity (a company’s share) through equity crowdfunding. The limits are more stringent because this falls under the “security” category. Companies seeking funding are at various phases in their development. They could be in the early stages of an idea with little traction or at a point where the firm is earning millions of dollars in revenue.
What Are The Benefits Of Raising Equity Crowdfunding?
Raising funding has always been challenging for early-stage entrepreneurs. At this point, most banks will not lend to businesses. The world of angel investment and venture capital is frequently mysterious and brutal.
Before this trend, an entrepreneur had to rely on her connections to obtain an investor’s attention.
It has been challenging for investors to gain access to high-growth enterprises. Only a select handful have had access to this information thus far. They are individuals who have access to the requisite network and are in the appropriate location at the proper time.
Unlike publicly traded corporations, where you can ask your broker to buy a share, buying shares in private companies has traditionally been restricted to a small group of people known as the “circle.”
According to data, private enterprises will generate a lot of money. It is critical (if you are interested in creating wealth) to invest in these businesses. Look at the graphic below if you’re the suspicious type. It demonstrates how returns are migrating from public to private markets.
Since its adoption in 2016, equity crowdfunding has been generating a lot of attention in the startup sector. It’s already paying off for some businesses, allowing them to launch new projects and accelerate growth. Despite this early success, there are a lot of misconceptions regarding equity crowdfunding out there. We’re debunking some of the industry’s most frequent myths and misconceptions.
Myths Of Equity Crowdfunding
Equity Crowdfunding Is Only For Large Businesses
Although having a proven development trajectory is a significant benefit in equity crowdfunding, it is not the only factor to consider. Startups with a strong potential for market disruption and companies with highly qualified founders are enjoying exceptionally early-stage momentum in equity crowdfunding.
No revenue, No Equity Crowdfunding
You don’t have to be profitable to participate in equity crowdfunding. You DO need a viable growth strategy with a clear route to profitability. Early-stage revenue won’t make or break you as long as you can convince potential investors that your trajectory is sustainable.
Equity Crowdfunding And Venture Capital Difference
We could write a whole page about the differences between venture capital and equity crowdfunding, but here’s the one that most companies care about: Entrepreneurs can obtain funds on their terms via equity crowdfunding, whereas venture capital deals are often concluded in favor of the investor. While your campaign parameters will still need to be appealing to attract backers, you will be in control when you fundraise through an equity crowdfunding site.
“Real” Investors Will Be Turned Off If I Start An Equity Crowdfunding Campaign
This widely held misconception is one of the most prevalent reasons entrepreneurs avoid equity crowdfunding, which is entirely false. A properly funded campaign demonstrates that your company has mass appeal, compelling value offers, and verifiable traction. A successful equity crowdfunding campaign can increase your company’s request to professional investors.
Only As A Last Resort Should, Equity Crowdfunding Be Used
First, attempting to collect capital via equity crowdfunding is advantageous for many entrepreneurs. A successful campaign will provide much-needed expansion capital, demonstrate market appeal, and set a precedent for your value request, allowing you more negotiating flexibility when approaching angel investors for your next round of funding. Equity crowdfunding should not be considered a last resort.
With the equity crowdfunding market expected to reach $28 billion by 2025, now is the best moment to jump on board this profitable new trend. Apply to collaborate with our team of specialists immediately to improve your chances of receiving funding. We’ll establish and convert your global network and help you pave the road for considerable future growth. To know more about crowdfunding, contact the ONPASSIVE team.