There are many different ways to finance your business: personal savings, business loans, venture capital, and now equity crowdfunding.
Equity crowdfunding is when you offer a portion of your company to people over the internet. They give you money, and in return, you give them company securities.
There are advantages and disadvantages to this system. Let's go over them.
Pros of Equity Crowdfunding
One of the most significant advantages is that you and your team can raise cash quickly. This benefit is especially valuable for entrepreneurs that are unable to obtain capital in any of the other standard ways.
Another benefit is that it involves the public. If you have a great consumer idea, crowdfunding is the way to go.
It displays your company and product in raw view for the public and gives them the opportunity to share it across social channels. Many businesses have succeeded by using equity crowdfunding as an advertising platform.
Not only that but when people invest in your startup, they'll want to protect their investment. This means more recommendations to friends, more social media content, and more brand ambassadors.
Lastly, equity crowdfunding gives you extra freedom to make decisions. Unlike some financing options, you won't lose control of the direction of the company. This means you are free to take your business to exactly where you want it to be.
Disadvantages of Crowdfunding
Unfortunately, there are some serious disadvantages of crowdfunding that need to be considered. First, crowdfunding is typically done on an online platform.
Many times these platforms charge fees or take a percentage of your earnings. In comparison when you pitch an investor, you leave with all of the money, no hidden fees. Here's how to rock your pitch with an angel investor.
Another disadvantage to equity crowdfunding is that you lose the opportunity to receive great a great mentor and partner. Investors want your business to succeed just as much as you do.
Therefore, if you partner with a knowledgeable and experienced business person, you'll receive a lot of their wisdom for free. This can be an incredible asset to your business.
Learn how you can talk to our top advisors and entrepreneurs.
Recognizing the Pros and Cons of Crowdfunding
Equity crowdfunding raised over $5 billion for startups in 2013, and that number continues to grow. There are many pros and cons of crowdfunding, so the decision ultimately falls on your shoulders. However, it's important to remember that there is no one right answer.
Do you want more freedom in your decisions, or do you want a teammate with already established business skills? Whatever you choose, your business will have great potential.
We can't wait to see you take your company to new heights!
Have any questions? Contact us! One of our seasoned professionals will get back to you quickly.