There’s always an element of uncertainty in any investment, but too many unknowns will stop great ideas from ever getting the funding they need to come to fruition.
Similarly, too many entrepreneurs will never get their business plan in front of professional investors. Equity crowdfunding can help solve that problem, by taking advantage of new technologies that allow for investors to gain better optics into mirky private company financials.
Making the right equity investment in an early-stage company can offer tremendous rewards, but it also carries a great degree of risk. The investment can pay off for years to come. But it’s also illiquid compared to buying stocks and bonds through the exchanges.
Is There a Remedy?
Absolutely. Choosing the right equity crowdfunding portal will help you connect with qualified investors in a transparent, accountable way. Issuing over the right portal will help eliminate uncertainty, fostering trust with the right people and driving massive investment.
One of the biggest barriers to investment in private companies is a lack of information. Publicly-traded companies are required to make a lot of information readily available, so it’s easier to assess their financial health. But this is rarely the case with private companies.
Choosing the right equity crowdfunding portal will help you connect with qualified investors in a transparent, accountable way. Issuing over the right portal will help eliminate uncertainty, fostering trust with the right people and driving massive investment.
Equity crowdfunding portals also address huge areas of uncertainty in the traditional venture capital landscape.
Investors want to do more than connect with entrepreneurs on LinkedIn or follow their companies on AngeList. They want deep access to a pool of vetted and sourced companies – companies offering opportunities capable of yielding high returns. But their ability to find those companies is limited without a portal which aggregates good opportunities and screens out the rest.
There are far more investment opportunities than the time and energy available to investigate them. If investors tried to explore every potential opportunity that hit their desk (using limited information to do so), they’d never have the time to make valuable investments.
Entrepreneurs want more than brief elevator pitches and creating 12-page Powerpoint decks. They want the opportunity to showcase all of the pertinent financial details – to tell their story – in a convenient, compelling way.
Uncertainty Entrepreneurs Face
No one can fault entrepreneurs for their lack of ambition.
In fact, the pendulum often swings too far in the other direction. Entrepreneurs see the value of their products or services because they build them firsthand. They’re naturally excited about all of that untapped potential.
When they approach investors, however, this can cause some entrepreneurs to rush things and create overambitious funding goals. They might end up diluting their ownership more than they should, for instance.
Other entrepreneurs set realistic funding goals, but they have poor processes in place to achieve them. Much of entrepreneurial success in the early stages is about testing, implementing, and pivoting to adapt to customer demand. Processes are built as you go along. So when it’s time to seek funding and plan long-term, there are often blind spots.
Entrepreneurs also struggle because many have limited knowledge of the best practices when it comes to raising capital. These entrepreneurs (especially first-time entrepreneurs) don’t have the experience of approaching venture firms or packaging their investment opportunities in the most appealing way.
Uncertainty Investors Face
Early-stage investors also face a lot of uncertainty. Generally, there’s very little trust in companies at this point.
Why? Because early-stage companies are privately owned and operated. Information about their financial health isn’t readily available like it is for publicly-traded corporations. Investors want to choose their bets wisely, and they have to face the very real fact that 3 out of 4 early-stage companies fail.
The Value of Transparency
One of the biggest barriers to investment in private companies is a lack of information. Publicly-traded companies are required to make a lot of information readily available, so it’s easier to assess their financial health.
Not getting a full picture of your financials makes it hard for investors to justify taking the risk. Even if the investors like you and your team, the understand that most early-stage companies fail. Offering more information via a crowdfunding portal will boost their confidence and assure them they’re making a smart investment.
The Value of Accountability
As an entrepreneur, it’s easy to justify putting off worrying about regulatory processes. There are so many other things to think about – everything from improving your product and customer service, to expanding your team and making payroll.
Getting into the habit of following regulatory processes now, however, will strengthen relationships with investors and position your company for sustainable growth.
Issuing equity via a crowdfunding portal is a great way to familiarize yourself with basic financial and corporate governance requirements without diving headfirst into the complicated, overwhelming waters of an IPO.
This accountability also adds a layer of legitimacy to your investment offerings. Investors feel more comfortable knowing you’ve followed procedure, making them more likely to invest.