Equity Crowdfunding, or investment crowdfunding, is where people can invest in a company that is not listed on the stock market. This is such a great tool for diverse company owners because the investors do not have to have accreditation.
To be an accredited investor, one must have an annual income of $200,000, or $300,000 for joint income, for the last two years with the expectation of earning the same or higher income.
Opening up investing to non-accredited investors opens up business to a larger pool of possible investors, making it possible for your target market to invest. Before using this great money-raising tool for your business, here are a few things to keep in mind.
Your financial information will be available to investors
For equity crowdfunding platforms, you will have to verify financial statements. This information will be available to anyone that wants to see it. If you do not want to share the financial history of the company, this may not be the money-raising tool for your business.
It takes a lot of work to advertise
Fatima Dicko, Founder and CEO of Jetpack, talked about her process in raising awareness about her company’s campaign, in an interview with Black Enterprise. “We had to make sure we put together material that would fully articulate the potential of our business to the everyday person within one to two minutes of visiting our campaign page. Although we understand the ins and outs of our business, we had to take a step back and remember that everyone else may not,” said Dicko. “This involved creating a short video, powerful visuals, and important metrics that potential investors can understand.” She advised putting a lot of time into awareness in the beginning of the campaign, so the main focus for the rest of the campaign will be managing the funds.
Set the bar high
You can always increase the limit for the amount of money the campaign can raise, but it can be a tedious process. To make changes to your campaign, you must update your financial information and notify investors to reconfirm their investment. To avoid this, set the maximum amount at a high, but realistic goal.
To successfully utilize this tool, figure out what your company’s goals are and find the best platform for you.