Ready, Set, Fund: How Equity Crowdfunding Can Help Your Business Grow

Hi, this is Steven from Drop. If you’d like to see if we can help you build your business, raise investment, secure business loans or scale, get in touch today.

In today’s email:

• What is equity crowdfunding

• Understanding the ‘crowd’ and the ‘funding’.

• Key elements to prepare for your crowdfunding campaign

• Top UK equity crowdfunding platforms

• What other funding options are available?

What Is Equity Crowdfunding?

Equity crowdfunding is a way for startups and small businesses to raise capital by selling shares of their company to a large group of investors, also known as the crowd.

So, what is equity crowdfunding all about? Essentially, it's a way for entrepreneurs to tap into a pool of potential investors who are willing to financially support and potentially even mentor the growth of a company. In exchange for their investment, these backers receive a stake in the company, which means they become shareholders.

Understanding the ‘crowd’ and the ‘funding’

Now let's break down the two parts of equity crowdfunding: the crowd and the funding.

The crowd refers to the group of investors who contribute money to your campaign. This can include friends, family, and even complete strangers who believe in your company's mission and potential for success. Equity crowdfunding campaigns are often run on specialised platforms, such as Seedrs or Crowdcube in the UK, which allow you to reach a wider audience of potential investors.

The funding refers to the capital that is raised through the campaign. This can be used for a variety of purposes, such as hiring new team members, developing new products or services, or expanding your business.

In addition to raising capital, equity crowdfunding can also be a powerful tool for marketing your business. By running a crowdfunding campaign, you have the opportunity to showcase your company to a large audience of potential investors, customers, and partners. This can help you build buzz and awareness around your brand and your products or services. 

It can be a powerful tool for marketing your business, as it allows you to build a community of supporters, gain media attention, validate your product or service, and demonstrate the value of your company. By running a successful campaign, you can increase awareness and interest in your business, which can lead to long-term growth and success.

Key elements to prepare for your crowdfunding campaign

Now that you have a better understanding of what equity crowdfunding is, let's dive into the key elements to prepare for a successful campaign.

Develop a solid business plan: Before you even start thinking about launching a crowdfunding campaign, it's important to have a clear idea of what your business does, what makes it unique, and how it plans to generate revenue. This means putting together a solid business plan that outlines your goals, target market, financial projections, and more. This will not only help you stay organised and focused, but it will also be a key resource for potential investors who want to know more about your company.

Build a strong team: A successful crowdfunding campaign requires a lot of hard work and dedication, so it's important to have a team of people who are committed to your company's success. This includes your core team members, as well as any advisors or mentors who can provide guidance and support.

Create a compelling pitch: Your crowdfunding campaign pitch is essentially a sales pitch for your business. It should clearly and concisely explain what your company does, why it's unique, and why it's a good investment opportunity. This can be in the form of a video, presentation, or written pitch, and should be tailored to your target audience.

Engage with your potential investors: One of the biggest benefits of equity crowdfunding is the opportunity to connect with and engage with your potential investors. This can be through social media, email newsletters, or even in-person events. The more you can build a relationship with your potential backers, the more likely they are to support your campaign.

Set realistic goals: It's important to have big dreams and ambitions for your company, but it's also important to be realistic about what you can achieve with your crowdfunding campaign. Set clear and achievable goals for how much you want to raise and what you plan to use the funds for. This will not only help you stay focused, but it will also give potential investors confidence in your ability to execute your plans.

Top UK Equity Crowdfunding Platforms

If you're looking to raise capital through equity crowdfunding, you'll need to choose a platform to host your campaign. There are several options available, each with its own unique features and benefits. Here are some of the top UK equity crowdfunding platforms:

Seedrs: Based in London, Seedrs is one of the leading equity crowdfunding platforms in the UK. It allows companies to raise capital by selling shares to a large group of investors and has a wide range of sectors including technology, health, and food and beverage. Seedrs also has a strong track record, having funded over 1,000 campaigns and raised over £1 billion in total.

Crowdcube: Another popular option is Crowdcube, which is based in Exeter. It allows companies to raise capital by selling shares to a crowd of investors and has a wide range of sectors including technology, health, and food and beverage. Crowdcube has funded over 1,000 campaigns and raised over £1 billion in total.

When choosing an equity crowdfunding platform, it's important to consider the fees, the types of campaigns they allow, and the support they offer. It's also a good idea to read reviews and talk to other entrepreneurs who have used the platform before making a decision.

What other funding options are available?

In addition to equity crowdfunding, there are a few other funding options available for startups and small businesses in the UK. These include:

Angel investors: Angel investors are wealthy individuals who provide capital to startups in exchange for equity ownership. They are typically experienced entrepreneurs or business professionals and they often provide not just funding but also mentorship and guidance. They can be a good option for early-stage companies looking for seed funding.

Bank loans: This is a traditional way of borrowing money to finance your business, and can be a good option if you have a solid credit history and a clear plan for how you'll use the funds.

Venture capital: This type of funding is typically provided by professional investors, such as venture capital firms or angel investors, who are looking to invest in high-growth potential businesses. In exchange for their investment, they often receive a share of the company's equity.

Government grants: The UK government offers a range of grants and funding programs for small businesses and startups, such as the Innovation Funding Service and the Small Business Grants Scheme. These grants are typically provided on a competitive basis, so it's important to do your research and make sure you meet the eligibility criteria.

Personal savings: For many entrepreneurs, funding their business with their own savings is a common way to get started. This can be a good option if you don't have access to other sources of funding, but it's important to be realistic about how much you can afford to invest and how long it will take to see a return.

In conclusion, equity crowdfunding can be a great way for startups and small businesses to raise capital and gain exposure. By preparing a solid business plan, building a strong team, creating a compelling pitch, engaging with potential investors, and setting realistic goals, you'll be well on your way to running a successful equity crowdfunding campaign. Remember, there are also other funding options available, so it's worth exploring all of your options before making a decision on which one is right for you and your business.

Do you want to grow your business?

If you’d like to see if we can help you build your business, raise investment, secure business loans or scale, get in touch today.