HomeFunding5 reasons why equity crowdfunding may be right for your business (Sponsored)

5 reasons why equity crowdfunding may be right for your business (Sponsored)

Turning a business concept into reality takes capital to get it off the ground. And it will usually require further funding in order to grow the business. There are many financing options out there, so you’ll need to decide upon the merits of each method and how it fits your business and its current circumstances and prospects.

Are you currently considering your funding options? In this article we’ll tell you about 5 reasons why equity crowdfunding may be right for your business.

Equity crowdfunding has become a popular way for founders to raise funds for early-stage and growth-focused businesses, with companies such as Revolut, who last year raised £3.8 million from 4,260 investors on Seedrs, embracing this approach.

However, aside from raising capital, there are more attributes that make equity crowdfunding an enticing option for businesses. Here are 5 additional benefits to look out for:

1. Validation for your business

It’s wise to seek validation for any product or service as early as is possible. This should be seen as an important part of the development cycle for any startup or early stage businesses. It’s vital as it allows entrepreneurs to understand the things that their customers want, rather than what entrepreneurs might think are wanted by customers. Choosing to raise capital via equity crowdfunding will showcase a product or service to a broad spectrum of critical investors and may help test whether there is a viable demand for your business. A successful crowdfunding raise can also provide validation for potential future investors such as VCs which can pave the way for future successful raises.

Also, many potential investors will test a product or service as part of their due diligence. They will then often provide valuable feedback or even become a regular customer. Entrepreneurs frequently also receive feedback and analysis on their:

  •  Business model.
  •  Growth strategy.
  •  Exit plans.

2. It represents an excellent marketing opportunity

For startups, crowdfunding is an excellent opportunity to showcase their business to a fresh audience in the form of the crowd supporting the raise, and also from the additional marketing activity that a platform, such as Seedrs, can offer their brand. They may also benefit from investors talking about their investments, which may in turn raise brand awareness and grow their customer base.

Later-stage companies often find that the equity crowdfunding process can raise the profile of the company, through extensive PR with high profile publications, digital marketing and even out of home advertising such as advertising on The London Underground.

3. It can create brand ambassadors

When customers become shareholders, the relationship between them and the business changes. Instead of merely passively buying the products or services of the company, they could become a brand ambassador, actively promoting them to other potential customers as they now have an interest in the business becoming successful.

4. Reach a broad spectrum of investors

If you raise capital via an equity crowdfunding platform, the chances are that you will receive capital from a wide community of investors. For example, ‘the crowd’ on Seedrs can include VCs, Angel Investors, Family Offices, High Net Worths (HNWs), institutional and intermediary partners.

Seedrs can also help source anchors (which can include VCs, Family Offices, Private Banks and Angel Investors)s) to invest before a funding round goes ‘public’. By securing an anchor investor first, it’s possible to increase the popularity of the raise and boost the confidence of other potential investors.

5. Receive valuable ongoing support

Lifecycle platforms such as Seedrs don’t just end the journey with a business once it has funded. That’s why communities such as the Seedrs Alumni Club, which supports businesses beyond their raise, can offer significant value to entrepreneurs.. Seedrs Alumni Club members receive access to valuable deals and know-how. This includes help from strategic partners, such as Amazon Web Services and Stripe, to encourage growth, technical support and marketing.

Over the longer term, as they continue to grow, alumni business will seek further funding and the ongoing support continues here. Many alumni businesses will return to the same equity crowdfunding platform for further rounds from either new or existing investors. For example in 2017 on Seedrs:

  • 24 Seedrs Alumni  returned to run full public crowdfunding campaigns to access further capital, generating  a total of £14.6M in investment.
  • 13 Seedrs Alumni returned to run private crowdfunding campaigns with existing investors, their community and the exclusive Seedrs Anchor Investor Service. £16M was invested into those campaigns.

The fact that so companies return to Seedrs for further rounds of funding demonstrates that entrepreneurs recognise that Seedrs is the platform for the entire journey and a trusted, long-term funding partner.

Considering equity crowdfunding as a possible route to taking your business to the next level? Why not apply to raise on Seedrs?

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Thomas Ohr
Thomas Ohr
Thomas Ohr is the "Editor in Chief" of EU-Startups.com and started the blog in October 2010. He is excited about Europe's future, passionate about new business ideas and lives in Barcelona (Spain).

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