There comes a point for every business when it needs capital to take it to the next level, whether that’s to grow your team, develop the next version of your product or scale your marketing efforts. But with so many financing options out there, entrepreneurs need to decide which avenue will give their business the foundations for further success.
In recent years equity crowdfunding has become increasingly popular for businesses of all stages and sizes to raise funds. For example early-stage companies such as Arion who last year raised £250k from 622 investors on Seedrs and Agility Scales who raised €750k from 333 investors have taken this route, whilst later stage businesses such as Revolut who raised £3.9m from over 4,000 investors have also embraced this approach.
However, equity crowdfunding offers more than just raising the capital businesses need.
Here we look at 5 additional benefits that equity crowdfunding platforms can offer entrepreneurs:
1. It can increase your brand’s visibility
For businesses raising through equity crowdfunding, there will be a large marketing push to announce their raise to both a new and existing audience. Platforms, such as Seedrs, can offer numerous marketing opportunities which can raise the profile of the company, through extensive PR, digital marketing and even out of home advertising such as exposure on The London Underground. Meaning that not only can you attract investors, you can acquire customers and raise your brand awareness during the process.
2. It can improve customer retention and create brand ambassadors
Equity crowdfunding allows you to offer the investment opportunity to everyone, including your own customers. Not only is that a great source of potential investment, but when customers become shareholders in a business, they have a vested interest in the success of a company and could actively promote the business to other potential customers. This is also useful in terms of customer retention, where businesses such as WeSwap used an equity crowdfunding raise to engage their 200,000 customers.
3. Reach a broad-spectrum of investors
The “crowd” on an equity crowdfunding platform encompasses a diverse range of investor types which wouldn’t be found if an entrepreneur was to go down other routes of raising capital.
For example, the Seedrs ‘crowd’ can include a mixture of VCs, Angel Investors, Family Offices, HNWI’s, institutional, intermediary partners, alongside an entrepreneurs friends, family, and existing customers.
Seedrs, in particular, also offer an anchor investor service which sources anchors (this can include VCs, Family Offices, Private Banks and Angel Investors) to invest before a funding round goes ‘public’. An anchor investor’s presence can bring a company closer to its’ funding target and can increase the confidence of other potential investors.
4. Validation of a business
All companies at some point in their journey require validation, and this is particularly crucial in the first few years of its lifecycle. An entrepreneur choosing to go down the equity crowdfunding route for capital will publicise their business to a new audience of critical investors who may help validate the business model and prove demand. A successful crowdfunding raise can also increase future funding success as VCs may look at this previous success and feel more confident investing.
Entrepreneurs frequently also receive feedback and analysis on their business, growth and exit plans, by investors carrying out due diligence prior to investing, which can be invaluable in a company’s success.
5. Get support throughout your company’s lifetime
If a company raises on a lifecycle platform such as Seedrs the journey doesn’t just end once a business has funded (as opposed to a transactional platform where the relationship would end there). That’s why communities of successfully funded companies such as the Seedrs Alumni Club, which supports businesses as they continue their journey beyond their raise, can offer significant value to entrepreneurs. For example, the Seedrs Alumni Club offers members access to exclusive deals and resources to guide their business to further success. This includes help from strategic partners, such as Amazon Web Services, Amazon Launchpad, and Stripe, to provide technical support and marketing resources to help businesses scale and grow.
As they continue to grow, alumni businesses will most likely need to gain further funding and the ongoing support from the crowdfunding platform continues here with many returning to the same platform for further rounds of funding. For example in 2017 on Seedrs, 37 Seedrs Alumni returned to run crowdfunding campaigns generating a total of £30.6M in investment.
The value an equity crowdfunding platform offers businesses after raising capital is equally as important as the value it adds while raising funds. The points above demonstrate how a lifecycle equity crowdfunding partner such as Seedrs could be your best route for making foundations for further success.
Considering equity crowdfunding as a possible route to taking your business to the next level? Why not apply to raise on Seedrs?
This article is produced in a collaboration with Seedrs. Read more about our partnering opportunities.