There are numerous benefits of equity crowdfunding that make it an incredibly exciting industry compared to traditional investment opportunities. Equity crowdfunding is democratising investing, making the investment in startups and early-stage businesses accessible to all whilst simultaneously offering an alternative route to raise capital for businesses looking to scale and grow.
Here are some of the top benefits:
For Investors
Get behind exciting, brave and innovative start-ups
Equity crowdfunding gives investors the ability to invest in some of the most exciting companies that are challenging the status quo and helping to bring innovation to the industry. Investors can back companies they believe in, and as shareholders stand to profit if the company pays dividends or an exit event occurs such as listing on the ASX or NZX.
Minimal barriers to entry
Part of democratising investment is not only the access to these innovative early-stage businesses but also the low entry price. Each offer sets its own minimum investment amount however it usually starts from around $250. This means, unlike other investment routes, it’s highly accessible to everyone. Without hefty transaction fees (we charge nothing to invest) or high minimum investment thresholds, equity crowdfunding provides an excellent opportunity to start your investment journey or diversify your portfolio.
Anyone can invest
Equity crowdfunding enables everyday investors to access unique and previously inaccessible investment opportunities. With the attractive area of private company finance traditionally locked away for wealthy and highly connected investors, recent regulation means that any resident over 18 can now get involved.
Diversify your portfolio
Diversification means investing in different assets in order to spread the risk. Equity crowdfunding provides an easy and powerful way to diversify your portfolio. Within equity crowdfunding, there is no limit on the number of companies you can invest in. Combined with low minimum investment levels and no hidden fees, this means investors can easily diversify their holdings across industries and stages. Private company investments also provide a great way to diversify your overall portfolio. Since they are not traded on a public stock exchange, they are often less correlated with the ups and downs of the market as other shares are and whilst riskier, the potential returns are often higher.
Due diligence
Before launch, a company has to go through a rigorous due diligence process in order to be accepted by the platform. As an intermediary, there are specific due diligence checks we are legally required to undertake. On top of that, the Equitise analyst team aims to select companies that have the highest chance of success for potential investors by spending weeks to months looking at the financials, team, business model, offer specifics and future plans. Only a fraction of the thousands of companies we analyse each year end up conducting campaigns on the platform. Nonetheless, despite our best efforts, we can’t predict the future with early-stage companies failing for various reasons. Make sure you consider the offer document and risk warning before making your investment decision.
Potential for high returns
Similar to venture capital, investing in private companies through equity crowdfunding can carry greater risk, but it can also bring greater returns if the business is successful and provides an exit opportunity. Getting in early means investors can potentially experience significant gains as the company grows (imagine investing in Apple or Google from the start!), however, investors can similarly face a higher chance of losing part or all of their investment if the company fails. For more information on returns, click here.
For Businesses
Access to capital
A third of startups fail due to a lack of capital. The world of venture capital can be brutal at times, and sometimes even the best businesses struggle to raise funds when they need them. The sad truth is that many deals hinge on founders being well-connected with key individuals, and industry outsiders face far higher barriers to funds. Equity crowdfunding provides a much-needed alternative avenue to raise capital, where the crowd, as opposed to just a few key individuals, decide if they want to invest. This access to capital hopefully means more early-stage companies succeed, helping to improve the industry for customers through its innovation.
The creation of loyal brand advocates
When you raise capital through the crowd, you create an audience that is literally invested in the success of your business. These individuals now have a real shared stake in the success of the business, and will often spread the word, purchase your products and do what they can to propel your business forward. With retail and wholesale investors engaging together, you might also walk away with some key strategic partners, insightful feedback and engaged stakeholders. For businesses, it’s a great way to reward your loyal customers, as who better to invest and stand to profit from your success than those who backed you from the start.
Mass brand awareness
Equity crowdfunding is not just about raising capital, it’s also a marketing campaign helping to increase brand awareness and possibly customers. The role of marketing in equity crowdfunding cannot be overstated, and most companies will experience a variety of press coverage throughout their campaign. In addition, the wide audience reached through the Equitise network, even if they don’t elect to invest, can provide another excellent marketing opportunity.
Industry and stage agnostic
At Equitise we consider ourselves industry and stage agnostic. That means we are open to all types of companies, from fintech to gold mining, from pre-revenue to profitable. Each company is assessed on its merits, and our variety of capital-raising instruments allows us to utilise the most appropriate method for a given company.
Fair capital raising structure
Our fee structure is transparent and clear, with no hidden fees along the way. We don’t demand a slice of equity for an unreasonable price, valuing each company fairly and as accurately as possible.
For investors and businesses, the list of benefits could go on and on. That’s not to say equity crowdfunding is without drawbacks and risks, and every deal must be objectively considered on its merits but we believe it's fantastic for investors, companies and innovation. If you have any questions at all, please do not hesitate to reach out.