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5 Reasons Why New Entrepreneurs Should Consider Equity Crowdfunding

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5 Reasons Why New Entrepreneurs Should Consider Equity Crowdfunding

By Startup Valley (541 words)
Posted in Entrepreneurs on June 18, 2014

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In times when traditional sources of capital are drying up, smart startups have turned to crowdfunding as an exciting alternative to traditional investors—one with the power to change the entire economic landscape in favor of small businesses.

The concept of equity crowdfunding is fairly simple to understand. Title III of the JOBS Act allows anyone to become an equity investor. Previously, a start-up in need of funding had a very limited number of investors they might persuade to contribute money to their project. When Title III becomes live, there will be as many potential investors as there will be people.

How can equity crowdfunding benefit your startup? There are several advantages to this new way of raising capital. Equity crowdfunding can significantly decrease risk via market validation. Many entrepreneurs know how many different challenges new business ventures face on the long road to success. Because crowdfunding requires you to appeal to a large audience rather than an elite few, it gives you a chance to predict how well your product will perform on the market. This is closely related to a second big benefit, described next.

  • Equity crowdfunding combines marketing with fundraising. When you choose to use it, you are given the ability to ensure you fully support the businesses model and you’re passionate about the particular industry. An equity crowdfunding campaign is a great way to learn what marketing strategies will be most effective. Using an equity crowdfunding platform and linking to it through your social media accounts is a great free way to spread the word about what you want to offer, helping you garner both money and attention to your product.
  • It creates a loyal customer base. The people who choose to help fund your vision will not only have a stake in your company's success, but they'll also be making a statement that they believe in your business. They'll spread awareness of your project through word-of-mouth to other likeminded people, and when the time comes, they'll both buy and recommend your product.
  • Everyone loves a good success story, and the media is always up for hearing about a dedicated entrepreneur with a dream or startup that's raised the needed capital by appealing directly to the public at large. It's only smart business sense to take the success you find with equity crowdfunding and use it to build momentum and increase your exposure.
  • It's relatively easy to do, even though it becomes your full time job in raising an equity crowdfunding round. True, familiarizing yourself with the platform you choose and learning the best techniques to get noticed will require great effort, but equity crowdfunding can help make your idea a reality, especially when you compare it to the fences you must jump over in applying for a loan or meeting with potential investors.

All it takes to get started is a simple registration process and creating the materials such as your pitch, photos or videos that you need to get your message across. For all these and other reasons, any startup hoping to succeed in the near future should seriously consider the option of equity crowdfunding.

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