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Market Information

Equity Crowdfunding Offers Fresh Opportunities for Startups and Investors

Monday, October 08, 2018

Crowdfunding has become a vital tool for many companies looking to raise startup capital through online platforms. Funding enterprises through crowdfunding websites allows businesses to gather small investments from a wide pool of investors. Traditionally functioning as a reward-based system, crowdfunding incentivises potential investors to contribute their dollars by offering up rewards, such as early access to products, in return for the investment.

Equity crowdfunding is a new form of crowdfunding that has begun to catch on in recent years. This type of crowdfunding differs from the traditional method by offering company equity to investors in exchange for their investment. By leveraging equity crowdfunding, potential backers now have access to a plethora of exciting investment opportunities, and startups looking for capital now have a way to offer real value in exchange for investment dollars.

New Chance for Startups to Cash In

This year, the Australian Securities and Investments Commission granted the first seven crowdfunding licenses to Australian companies. This moved opened the door for startups looking to raise capital for their business ventures. Companies such as SendGold, an Australian fintech firm, have already begun to take advantage of equity crowdsourcing.

This new system of investment provides an essential step up for companies who are competing for traditional venture capitalist funding. Equity crowdfunding features a lower financial barrier than conventional funding opportunities. The fees associated with starting an equity crowdfunding campaign are nominal, and many platforms only charge the company after the campaign has completed.

Aside from the low initial costs of an equity crowdfunding campaign, startups can benefit from greater awareness that the campaign brings to their company. By reaching out to a large pool of investors, crowdfunding also provides a marketing platform for startups that can lead to increased exposure for their brands.

Potential backers can turn into valuable customers that provide long-term financial security for startups that choose to engage in equity crowdfunding. Understanding the advertising value in running a crowdfunding campaign is important to a new company’s bottom line - especially during the startup phase when every investor dollar counts.

A Powerful Tool for Modern Investors

Not only does equity crowdfunding make it easier for startups to find financial backers, this new method of funding also enhances investors’ ability to access companies in need of capital. The network of available investment opportunities is now virtually endless, and those who are interested in becoming venture capitalists can find the opportunity that fits them best.

In the past, the typical investor needed access to hundreds of thousands of dollars in order to invest in new businesses. Now equity crowdfunding platforms offer investment opportunities for as little as $250. This low buy-in cost provides a unique opportunity for those who are new to the world of investing. With equity crowdfunding, venture capitalists of all shapes and sizes can decide on the amount of risk that is right for them.

Decentralising equity investment opens up the private equity market to new people around the world. Diversifying the private equity market gives investors a wide array of choices, and now financial backers can invest on an international scale. The UK and US have been the biggest proponents for equity crowdfunding, but the trend continues to grow into new markets like Australia.

As more businesses are successfully funded through equity crowdfunding platforms, more investors will take notice, and this modern method of matching startups and backers will take hold in developing economies that were inaccessible to investors before. The World Bank recently weighed in and predicted that the crowdfunding will grow to a $93 billion industry by 2025.

Startups and investors should take advantage of this powerful new way to raise capital. There are now services catered toward helping backers and small businesses connect with each other. And by leveraging equity crowdfunding, your dollars can go further than ever before.

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