When it comes to raising capital for your app startup, you're not alone in seeking alternative funding sources. The Jobs Act's regulations implemented in 2015 and 2016 opened doors for equity crowdfunding, enabling businesses to secure smaller investments from a broader audience of people. This shift democratizes access to investment opportunities, allowing the general public to invest in privately held companies – previously reserved for accredited investors.
Benefits of Equity Crowdfunding
Gaining an impressive number of crowdsourced investors not only provides much-needed capital but also demonstrates market approval of your concept or product. Beyond finances, equity crowdfunding offers numerous benefits that can propel your app startup forward.
Access to Investors
The average person, age 18 or older, can now make an equity investment in a company. While there are restrictions on the amount they can invest based on their income and net worth, the access to investment opportunities is far broader than before. This means you can promote your business to the crowd and get a lot of small investments that can add up to a large amount of capital.
Affordability
The process is streamlined by using a platform that supports the equity crowdfunding process. Many don't charge a setup fee and take a small percentage of funds raised, making it an affordable way to raise capital for your app startup.
Efficiency
Leveraging a crowdfunding platform to reach a broad audience frees you up to focus on building your business rather than trying to figure out how to find big investors, get an introduction, and present your pitch. This efficiency allows you to allocate more time and resources to growing your app startup.
Control
With equity crowdfunding, you're in control of the company valuation and setting the share prices. What's more, because you'll have many smaller investors, there'll be no large group of investors that holds majority power to sway decisions. This may give you peace of mind that you remain in control of your company.
Market Research
Your investors are the early adopters of your vision and product. They may provide you with valuable feedback on your messaging and offering, helping you make adjustments to improve your odds of success.
Marketing and Media
Your crowdfunding campaign is a marketing campaign. If you make the most of social media and digital channels to spread the word, you may also raise awareness of your brand and extend your reach beyond your investors. And, if your campaign is successful in raising funds, that may be newsworthy and get you press coverage.
Brand Advocates
Your investors can be ambassadors for your business. With crowdsourcing, you can build a large team of investors, which means you'll have many people out there talking up your app startup.
Market Validation
Gaining an impressive number of crowdsourced investors helps demonstrate that the market approves of your concept or product. This can validate your pitch when it's time to seek angel investors or explore other funding options.
Remember to consult a professional before making any business decision, as they can advise you based on your individual situation. With the right approach, equity crowdfunding can be a game-changer for your app startup, providing access to capital, affordability, efficiency, control, market research, marketing and media opportunities, brand advocates, and market validation.