You’ve heard it before. Scaling a start-up or established business is hard work. In most cases, businesses are strapped for cash and unsure how to change that.
Outside of traditional bank loans and equity investments, investment crowdfunding offers a new route to gaining capital for your business. If this idea has piqued your interest – keep reading to discover the top five things to know about raising money through investment crowdfunding.
1. You define the terms.
A term sheet is something that inevitably accompanies every debt and equity investment or loan. It makes sense. Someone is willing to lend you money, so they make the rules. With investment crowdfunding it’s just the opposite. You define the terms of the deal and present the offering to the public to decide if they want to invest in those terms or not.
An investment crowdfunding campaign can be built to offer options such as a revenue-share agreement (not offered through banks), term-loans, equity (straight or shares), S.A.F.E. (Simple Agreement for Future Equity), convertible notes, etc.
2. Your campaign is considered a legal security and yours to promote!
Once the appropriate documents and financials have been approved by the State, your campaign begins (and so do the investments!)
For up to 12 months, you can promote your campaign as a legal security across the State of North Carolina. This gives you the option to tap into a large pool of potential investors from your existing customers, contacts, and people in your community who already support your offering.
3. You can raise capital and test the market at the same time.
How? With an investment crowdfunding campaign, you have the option to offer a ‘perk’.
In many cases, entrepreneurs are passionate about their product or offering without really knowing if there is a market for it. Consider your campaign offering a way to gauge the interest of a potential investor, and perk being an added plus. By creating perks that are useful or compelling to your audience, the more likely you are gain an investment.
Perk examples can include materials (free or discounted product) or experimental (event invite, tasting or consultation).
4. You need a crowd.
To have a successful crowdfunding campaign, you need support from your family, friends, their family and friends, and anyone interested in your offering or product and interested enough to want to help support your business.
Remember, engaging with your crowd is the key to your campaign success, so prioritizing marketing outreach, perfecting your story, and developing visual assets are key. However, the law defines what you can and cannot do when it comes to advertising and marketing your security offering, so make sure you know the law or work with those that do.
5. There are no gatekeepers.
Investment crowdfunding allows you to avoid the traditional gatekeepers you find with banks, venture capitalists, and angel investors. How your campaign attracts capital is based solely on the public's response to your compelling offering and interest in your product or service. Ultimately, the public decides if you get funding for your business, not loan officers or investment committees.
Interested in hearing more? Click here for access to our on-demand, webinar, “Raising Capital Through Investment Crowdfunding: Five Things to Know.”