Equity Crowdfunding is Redefining the Starting Line in Raising Capital

Taking some time today to share with you some jaw dropping information...

We have seen a 50% increase quarter over quarter in venture investments across the globe in 2021 Q1, it is clear that investors are liking what they are seeing. As most investors with their ear to the ground in the space knows that the SEC rules expanded the maximum amount of funding allowed in 12 months up to $5 million. That is a five-fold increase from the previous $1 million.

That increase means equity crowdfunding has greater reach into the marketplace for even higher caliber investors with more money to invest and of course more seasoned startups to venture into the Reg CF waters.

With equity crowdfunding, small business and startup entrepreneurs aren’t as fast to secure enormous capital from a few small places to get sizable checks from VC’s & Hedge Funds like they have traditionally done. They are turning to and leveraging the power of the ‘Crowd’.

Imagine moving massive pieces of furniture and could only do it with one or two other people. If just one of those takes away their effort, then the progress made could come to a screeching halt, and there might not be any forward motion at all. Sourcing investments from the crowd allows for more of the market to be reached. Other benefits of equity crowdfunding include:

  • High efficiency through a platform that brings a broad reach

  • No setups fees make EC more affordable for a startup;

  • Better business promotion through investor access is possible with Equity Crowdfunding;

  • Investors become business advocates for your product, and with an increase in investors comes an increase in credibility for the marketplace;

  • Brand awareness growing in tandem with funding growth

The improvement to visibility, growth, and brand approval are only some of the massive value a startup can draw from equity crowdfunding. You even control the company valuation and set share prices at your discretion. No high-powered investors are swaying decisions for your brand. The downside to this for the company is that the retail investor is getting more savvy and educated on what a good or bad deal looks like. So, if a founder sets an unrealistic valuation, the crowd is going to let them know- by taking their investment elsewhere.

A Big Question I get is: How to Get Your Money After Investing in an Open Public Offering

Most of us know with an IPO, you can buy a stock and then sell it off the very next day. That is not the case with Open Public Offerings (OPO). There are a few ways to get returns on your investment, and they are generally very long-term. And some new to Equity Crowdfunding don’t always understand that the average wait for a return on capital is, on average 7 years for an acquisition or most times even longer for an IPO. This of course assumes the company doesn’t fold along the way.

The reason I bring this up is because I’ve been hearing some rumors of an exciting IPO from a company that raised on WeFunder last year. We are doing some digging right now to make sure we have all the proper information for you, but this would be huge for the entire space, especially for those who invested in this particular deal.

The process of an investor getting shares once a company goes public is pretty straightforward. Usually the Startup will work with a transfer agent- who will receive the names of those who invested in the initial rounds, those investors will have converted through subsequent rounds and then once they’ve calculated the number of shares each investor will receive they then deposit those shares into the investors' individual brokerage account.

Why are we talking about this right now? 2021 has been a historic year for IPOs. How historic? 767 so far. That's right 767. Think about that for a second. That is truly unbelievable. That destroys the record that was set in 1999 by a lot. It is clear. More companies than ever before are going public. This is where Equity Crowdfunding really starts to become a factor.

Equity Crowdfunding is a Big Hit with Entrepreneurs & Investors Alike

While investors certainly enjoy the benefit of getting in early and the low prices, entrepreneurs also find value in equity crowdfunding.

For Entrepreneurs: If you are getting started, the marketplace has a tremendous level of access to you, and when intelligent investors looking to invest are on the hunt, your business will be there. This allows startups to raise capital much faster than you would if you needed to sit down with each potential investor. The online platforms allow scaling that could never happen if thousands of investors all require in-person meetings. That would not be feasible in this day and age.

They also have early access to anyone who wants to contribute. A massive machine like Microsoft or Apple does not need to be in full stride before an investor can contribute anymore. Investors see the lowest prices that they will encounter in the early stages. The highest returns come from these valuations since the future price point will likely be higher. As platforms bring a broader scale and improved quality, investors are getting into a space that raises funds in a way not seen in years past. If a company goes public, then the returns in the marketplace could be enormous.

For Investors: A democratized stage for seed investing is a game changer. Most importantly the playing field is finally starting to level out for the retail investors. As stronger startups survey the landscape for their capital needs, Reg CF is starting to become a viable option, but there really is only one reason for that: YOU! If you don’t see the value in the space and vote with your investment dollars they aren’t coming here. There is extreme power in a collective group of investors leaning into a startup. I stat I love to share is that it only takes 1,000 people to invest $1,000 to raise 1 Million dollars. The latest estimate is that there are 333 Million Americans. That means that it only takes- .000003 percent of the us population to raise $1 million dollars. It’s amazing what just a few investors can do, but what’s even more amazing is what this community is doing and how you are shifting the entire industry of Reg CF.

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