There are many ways to help your business raise money when it’s in its infancy. Over the past few years, crowdfunding has become a popular way to raise capital with few or no questions asked. Even more recently, equity crowdfunding was made legal for all businesses. What is equity crowdfunding, and how can equity crowdfunding help your company?
What Is Equity Crowdfunding?
Crowdfunding is the process of asking individuals for small investments because they want to see your product come to fruition. In exchange for their money, each investor gets a reward of some sort. Typically, the reward is the finished product. However, with equity crowdfunding, an investor is buying a piece of your company in exchange for that person's money. The amount of equity that a business owner puts up for sale depends on the amount of money that needs to be raised, the perceived value of the company and the type of investor that the company is looking for.
How Does This Help A Business?
This can help a business because offering an investor part of your company offers a chance for that investor to earn money in the long-term. If the company takes off, each shareholder will see their investment grow in value. Even if the company does not do well, an investor may still take a tax write-off that could help them save money at the end of the year. When someone merely donates their money to a business, there is no chance to either grow that money or write it off of his or her taxes.
Connect With Serious Investors
Serious investors aren't just giving your company money. In addition to their money, they can offer their expertise and connections in the industry that you are trying to break into. Therefore, they aren't putting money into a business out of the goodness of their hearts. Instead, they are going to demand they get a return on their money in exchange for everything they’re giving your company. If you aren't willing to give up a little bit of control in exchange for such a great opportunity, your business might not be able to attract the type of investors that it needs to survive in the future.
Equity crowdfunding can be a boon for your company. It allows you to offer investors a chance to help shape the future of your company while also giving them an opportunity to grow their money. By offering a piece of future earnings, you can attract the right investors to your business and make it easier for your company to grow and thrive.
