Blog Details

5 great motives to ask the crowd to finance your company via equity crowdfunding

It is well known that the real challenge that an entrepreneur has to face is found financial capitals for its own business. Capitals to start a new business is more and more achieved without the traditional financials channels as banks, venture capital or business angels. The fintech revolution has interested also the entrepreneurial segment. Technologies development allow everyone to share a project, an idea, a business agreement with the crowd, asking financial support to realize their idea.

Among the options that are particularly appreciated in the process of democratization of finance, crowdfunding is growing as a great alternative way for new companies to collect financial resources. Crowdfunding defines a phenomenon of collective online microfinance. A process by which a group of people sustains financially, in relation to the interest in the project and financial resources, a new initiative.

Equity crowdfunding segment allows newly established companies to sell their shares or shares of capital to non-professional investors, investors who become shareholders. The benefits of equity crowdfunding are many, both for entrepreneurs and investors.

You will need only 5 good reasons to decide to found your business with the crowd.

  1. Collect capitals. Crowdfunding allows you to expose your business idea to a group of investors, even if not professional, willing to invest savings in companies with high growth potential. Investors of any nature or experience are interested in financial returns. If your business has a scalable product, good development capabilities, and growth perspective, investors will be willing to invest in nascent realities with high potential. The first big advantage deriving from equity crowdfunding is the possibility of addressing a large audience and expose your idea to raise capital to invest in the early stages of the company's life.
  2. Low risk, high operational flexibility. Crowdfunding is based on a large number of investors, the risk of a company is therefore divided between a plurality of subjects, rather than remaining concentrated in the hands of a few. From this point of view, with equity crowdfunding, the team has more operational and managerial discretion than the involvement of professional investors who normally exert greater influence in operational and strategic choices.
  3. Networking capital. A crowdfunding campaign allows building a network of investors, customers, and partners around the company. The media exposure, the direct interaction between investors and entrepreneurs, leads to the construction of an ecosystem in which the company begins to legitimize itself and forge strategic partnerships for the subsequent phases of growth. Often the companies that were born from the equity crowdfunding, and therefore that have been validated by the crowd, have become visible thanks to the success obtained from investors such as venture, banking channel, or business angel to obtain additional capital to invest in the business growth. The trust given by the market is a sign of credibility for investors and therefore an incentive to invest in certain companies. Finally, a good crowdfunding campaign increases the visibility of the company by bringing it to the attention of the general public.
  4. Investors and customers. In a crowdfunding campaign, investors can be also the first users of a new product or service. During the campaign, the team has the opportunity to directly confront the crowd by welcoming doubts, questions, and product reviews. This direct contact with the target market is a valuable market test to improve the core business in view of the launch on a national or international scale.
  5. Simple, with a lower cost. Launching a crowdfunding campaign and raising funds successfully to start a business involves investing material, monetary and temporal resources. It is not free, nor simple to achieve success. However, the mechanism is very intuitive and simple both for enterprises and investors. Entrepreneurs can show their ideas on a page with videos and multimedia materials that encourage investors to discover the company. Once the campaign is over, the funds are credited directly to the companies. There are less operating costs to increase risk capital than traditional systems, and the standardization of investment procedures also for investors leads to significant savings in terms of time and money.