After years of global growth, innovative finance options such as equity crowdfunding are on the verge of changing Asia’s business landscape, making the process of raising funds more accessible, efficient and transparent than ever before.
Equity crowdfunding is a financing model that allows businesses to sell company shares through an online platform in return for the capital they require to achieve their business goals. By bringing the process online and opening it up to the masses, equity crowdfunding is changing the way entrepreneurs finance their businesses.
In June, the Securities Commission of Malaysia licensed six platforms to operate in the Malaysian market (of which Eureeca is one). The Thai government is now looking into bringing the model to Thailand and the Chinese are going to soon be regulating the space. In short, equity crowdfunding is setting roots down in Asia, and given the region’s embrace of other forms of crowdfunding and its maturing entrepreneurial ecosystems, is likely to explode in growth in the coming years.
For entrepreneurs, there are a number of reasons why they are choosing equity crowdfunding instead of more traditional methods as they prepare to look for investment.
5 reasons to equity crowdfund your startup
Efficient access to capital: Simply put, equity crowdfunding platforms make raising capital more accessible and efficient than going through more traditional financing sources such as banks and venture capital funds.
Customer loyalty: What better way to ensure that your customers remain loyal to your brand than to let them become shareholders of your business? Equity crowdfunding’s democratisation of the investment process means that your customers can do just that.
Brand ambassadors: Anyone who invests in your business automatically has a vested interest in seeing it succeed. By opening up your round to the crowd, you can create an army of brand ambassadors that will promote and help out your business whenever possible.
Brand awareness and marketing: Equity crowdfunding campaigns by nature are very public endeavours, and therefore, serve as great awareness raising and marketing opportunities. Not only can they help you secure investment, but they can help you attract new customers and media coverage.
Interest-free capital: Unlike bank loans that require regular interest payments, which can be debilitating for a young business and its cash flow, equity investments allow entrepreneurs to avoid this burden and focus their funds on growing their businesses.
Tips and strategies for a successful campaign
As you can see, the benefits of equity crowdfunding are numerous and wide-reaching. However, you have to launch a top-notch campaign in order to successfully hit your target and secure the funds. Here are some tips and strategies you should follow to give yourself the best chance of success.
Start early and plan ahead: Equity crowdfunding campaigns are speedier and more efficient than raising money offline, but they still take time and strategic planning. Don’t wait until you’re already desperate for the money before launching a campaign. Give yourself plenty of time — the recommended time is about six months before you’ll actually need the money — to start the process and develop an internal campaign strategy.
Tap into your personal networks for investment: We at Eureeca think that this is flat out the most crucial component of a successful equity crowdfunding campaign. People that know you and your business — your friends, family, acquaintances, customers — are your best source of investment and will likely be investing for reasons other than financial gain. To not bring considerable investment from your personal networks undermines the democratic, participatory nature of equity crowdfunding and also likely seals the fate of your campaign. Get them to get the ball rolling in your campaign and that will inspire confidence among the platform’s investors to follow suit and close the round.
Deliver a compelling pitch: A well put-together and compelling online pitch that gets to the heart of what your business does and the market pain it alleviates is crucial for attracting investment, just as it would if you were offline. Deliver a great pitch and position yourself to hit your target.
Offer a fair deal to investors: You’ve put your blood, sweat and tears into your business so it’s only natural to seek the highest possible valuation, but overvalued companies are unlikely to get funded. Be fair when you set your valuation; offer an attractive deal.
Spread the word: This may seem obvious, but it is imperative that you spread the word about your campaign to everyone you know. Contact your university alumni office, email childhood friends, post on your parents’ Facebook pages. Leave no stone unturned; you never know who may want to invest.
Be ready to work: Dedicate regular time to maintaining your campaign, communicating with investors, and spreading the word about your fundraising round. Investors will take note of your energy and drive, which will greatly influence their decision to invest or not.
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