Please pass the bread basket
Equity crowdfunding is the perfect appetizer to pair with the entrée of venture capitalism. Venture’s are often looking for small companies they can scale to massive profitability, and generally, startups that complete an equity crowdfunding round, have in effect been vetted, by the everyday people that make up the crowd of small investors supporting those startups. Of course that doesn’t mean every investment is a slam dunk – professional due diligence is always important. However, it does give venture groups reason to believe in the viability of a startup.
Why? Because smaller investors have fewer equity investment options; as such they are more vocal with their support for what they adamantly believe in and will in turn heavily market their investments to their network. Less options to build wealth make for a very motivated and engaged network that seizes opportunities that arise. Overall, equity crowdfunding activates a wider, more motivated investor pool that ultimately benefits the venture capital ecosystem. For everyday people, equity crowdfunding is an inexpensive path into the investment market; a place they could not easily tread before 2016.
The industry is quickly gaining momentum, even in Australia. Down Under, equity crowdfunding has more than doubled from $2.7 million to $6.9 million (in tech and startup), just in the first quarter of 2019. Crikey!
Grab a seat at the table
Even though the overall success rates of equity crowdfunding campaigns are higher, it’s well known that women and minorities struggle to secure funding; forcing many to rely on their network and personal savings. Equity crowdfunding offers investment opportunities for everyday people, but it also flips the script on who gets a seat at the table with regards to startup funding.
Here’s a real world example of how it worked for Behemoth Brewery:
“Behemoth is seeking to raise up to $3.5 million through crowdfunding and wholesale investors, which represents 13.09% of the company. Shares are priced at $1 each with a minimum investment of $1,000. Investors will receive additional rewards with each share parcel sold, which could include discounts, merchandise, exclusive event invitations, beer naming, and of course Behemoth beer. Those that invest over $50,000 will receive voting shares.
The crowdfunding and wholesale investor campaigns has already raised a combined $500,000.” (source)
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