The pros and cons of equity crowdfunding
Posted on Jul 20th 2021
Equity crowdfunding—otherwise known as crowd investing or crowdfunding—lets new companies and private organizations raise capital from the general population. It allows regular individuals to put resources into your business, and in return, you offer them value in your business. Every investor is qualified for a stake in your company according to their investment.
Who is equity crowdfunding for?
In contrast to mainstream thinking, value crowdfunding is not only for tech organizations—it is for anybody with a viable business strategy. As long as you are willing to surrender some level of ownership in your business, your bread shop, your fashion brand, and even your construction organization can meet all requirements to raise funds. If you have a product or service that recounts an incredible story that regular purchasers can get behind, understand, and support, at that point, you are halfway there.
Pros of equity crowdfunding:
The main advantage of equity crowdfunding is that you can collect a large amount on crowdfunding platforms. When you and your legal advisor have organized your offer contribution and picked a forum, you could go from underfunded to entirely financed very quickly. Usually, you would need to go toward every investor independently and try them out on your idea, which can require years.
The other key advantage is that you hold company control instead of having an investor who might need to be on your board and have a say in your organization's decisions. Furthermore, since investors are part proprietors with a stake in the business' prosperity, you have a group of committed brand advocates from the beginning. This implies a group of individuals who impart your image to their organizations and bring issues to light for your products and build brand awareness simultaneously.
Cons of equity crowdfunding:
The main disadvantage with equity crowdfunding is that you may wind up with lower-quality investments than you would have if you had raised financing from more traditional sources, like financial investors or private investors. Since the overall population is less capable of business and contributing and does not ordinarily meet the total assets of certifying financial backers, you will not profit with large amounts of capital or the business advice that many investors often provide.
At last, you will need to consider how you would oversee having such countless investors with a stake in your business.