Community crowdfunding

Community crowdfunding is a form of crowdfunding that includes equity crowdfunding and debt crowdfunding as its subcategories. For entrepreneurs who face difficulty in securing funding from traditional sources such as angel investors, venture capitalists, and banks, these alternative crowdfunding methods can be a viable option.

Equity and debt crowdfunding allows entrepreneurs to raise capital from a diverse group of investors who contribute small amounts of money in exchange for equity or debt in the company. This type of funding can be facilitated through online platforms, and the amount of capital that can be raised depends on the offering and the platform used.

To successfully utilize equity or debt crowdfunding, it’s crucial to have a solid understanding of the fundamentals of community crowdfunding. This includes the types of investors that participate and the potential amount of capital that can be raised. 

In this article, we will explore how to grow your business with equity crowdfunding.

Understand the basics of Community crowdfunding

Prior to pursuing funding through community crowdfunding, it is essential to understand its fundamentals. Equity crowdfunding enables businesses to raise capital through online platforms by offering shares of the company to investors or allowing investors to lend capital to a founder in the form of debt. These investors may be individuals, organizations, or groups. Depending on the platform and the type of offering, the amount of capital a business can raise through equity crowdfunding can vary.

Regulation Crowdfunding (Reg CF) and Regulation A+ are types of equity crowdfunding. Reg CF permits businesses to raise up to $5 million, whereas Reg A+ permits businesses to raise up to $75 million. Unlike donation crowdfunding, Reg CF and Reg A+ require greater regulatory compliance and are governed by the SEC and FINRA for protection and transparency.

Choose the right equity crowdfunding platform

There are a variety of equity crowdfunding platforms available, and it is essential to select the most suitable one for your business. Each platform has its own rules, regulations, and fees; therefore, it is essential to investigate each platform to determine which is the best fit for your business.

Each platform has its own strengths and weaknesses, and it is important to consider the platform’s fees, investor network, track record, and other benefits. Seed At The Table, for instance, provides a diverse founder focus as well as advisor and resource matching.

Create a compelling pitch

A successful equity crowdfunding campaign requires a compelling pitch that clearly communicates the value proposition of your business as well as the benefits of the partnership to potential investors. Your pitch should highlight your business’s unique selling points, market opportunity, and growth potential. It should also address any potential risks or challenges associated with your business.

Your pitch should be visually appealing and include multimedia elements such as images and videos to engage potential investors. It is also important to include a clear call to action that directs potential investors to your crowdfunding page. The goal is to allow both your investors and customers to be advocates of your business.

Set realistic funding goals

A successful equity crowdfunding campaign requires setting attainable funding goals. Your funding goal should be based on the financial needs and growth plans of your business. It is essential to set a funding goal that is neither too low nor too high, as this can deter potential investors. According to research, the average raise is $200k.

Setting a realistic funding goal also helps to create momentum for your campaign. If you achieve your funding goal early in the campaign, this can generate excitement and encourage more investors to contribute. Also, only 150 Black women have ever raised more than $1 million in any capacity, so it’s important to keep your expectations realistic. Two of the 150 have been launched by Seed At the Table.

Build a strong investor community

Building a strong investor community early (even before launching) is key to the success of your equity crowdfunding campaign. Your community should include early adopters, supporters, and evangelists who are passionate about your business and can help spread the word about your campaign.

It is important to engage with your investor community regularly through social media, email newsletters, and other communication channels. This helps to create a sense of belonging and fosters loyalty among your investors. You can now legally “test the waters” which means assessing your communities intentions to invest in private before fully launching publicly.

Deliver on your promises

Equity crowdfunding is not just about raising capital; it is also about building a community of supporters who believe in your business. It is important to deliver on your promises and provide regular updates to your investors. It’s also important to be transparent about your business’s progress and any challenges you face along the way. This is not only encouraged, but required by FINRA/SEC. Delivering on your promises also helps to build trust and credibility and create a positive reputation for your business, which can attract more investors in the future. 

Leverage the power of equity crowdfunding beyond funding

Equity crowdfunding can provide more than just funding for your business. It can also provide valuable marketing and exposure opportunities. A successful equity crowdfunding campaign can generate media coverage, attract new customers, and create buzz around your business. It’s an opportunity to allow your community and customers to participate in your growth journey while continuing to consume and advocate your product as fans, customers, and investors.

By leveraging the power of equity crowdfunding beyond funding, you can create a virtuous cycle of growth and success for your business. For example, you can use the funds raised through equity crowdfunding to launch new products, expand into new markets, or invest in marketing and advertising campaigns.

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