Last week’s DigitalAMN blog “5 Questions About Equity Crowdfunding You May Feel Silly Asking — But Shouldn’t!” seems to have struck a chord with readers. Yay! We love seeing an increase in curiosity and engagement surrounding equity crowdfunding because it means small businesses, entrepreneurs and everyday people are recognizing it as a tangible route to the American Dream and building generational wealth.
1. How can I invest in equity crowdfunding?
You can invest in any company raising money using a funding portal, online. Investing through equity crowdfunding can be done from the comfort of your sofa, without needing to use a broker. If you’re curious to learn more about investing via equity crowdfunding, check out TruCrowd’s online investment portal.
2. Is equity crowdfunding new?
Across the globe, no. In America, relatively, yes. Equity crowdfunding was designed as part of the ‘jumpstart the economy’ effort after the 2008 recession, so small businesses could access funding from a larger investment pool. Since its inception, crowdfunding has proven its merit by already injecting $1 billion into local communities.
3. How much does it cost to run an equity crowdfunding campaign?
The cost of equity crowdfunding is based on two factors and they both vary.
- Onboarding and capital raise fees: (i) Onboarding Fees – This is the cost to secure a spot on a platform/portal (TruCrowd, Republic, Wefunder, etc.). These costs could include legal and accounting; and, (ii) Capital Raise Fees – Considered a funding fee or success fee, this is the percentage of the raise that is paid to the platform. Percentages vary widely from firm to firm; and,
- Marketing – this is the cost you pay to a Reg. CF or Reg. A+ marketing specialist (i.e. TruCrowd Services, LLC, etc.) to communicate your project’s message to your current supporters and/or to broaden outreach to a larger audience to secure their financial support. These costs typically include communication consulting fees and an advertising budget.
It should be noted, whenever an entrepreneur’s startup or development stage business is a client of DigitalAMN, most of these costs could very well be covered. That is the fundamental purpose of the DAMN ecosystem, to help ensure not only a successful funding campaign, but to provide the much needed support when building a business. Valley of Death, anyone?
4. How much can I raise with equity crowdfunding?
Currently, you can raise up to $1,070,000 per year with an equity crowdfunding campaign. However, it should be noted that the SEC (Securities and Exchange Commission) proposed to increase the maximum raise amount to $5,000,000. It is anticipated that this proposed increase will occur sometime this year.
Two other items to note:
- With regards Reg. CF, given the current Covid-19 pandemic, the SEC also made provisions to provide temporary relief to businesses stricken by the coronavirus, allowing them immediate access to the capital they raise; now [temporarily] up to $250k without reviewed financials; and,
- Under Regulation A+ (Reg. A+), even more money can be raised using “the crowd,” but different rules apply. We can help you figure out what makes the most sense for your endeavor.
5. What’s one thing I should know about equity crowdfunding?
It’s an entrepreneurs’ best shot at making their business a reality and the only practical opportunity for the 99% to invest in young companies while they’re still affordable.
Why should I care about crowdfunding?
It’s inclusive, creates jobs and injects money directly into local communities. Equity crowdfunding helps to address the deep systemic issues in the financial ecosystem which includes venture capital and Wall Street. Power to the people, indeed.