Equity crowdfunding is now available as a new way to raise money for your business.
In short, equity crowdfunding allows your company to raise money online by selling small amounts of stock to a large number of individual investors.
As you think about using crowdfunding and plan ahead for your business, it’s important to get up to speed on the possibilities of this new way to raise money, so you can evaluate it as an additional source of funding for your business.
In the video below, I discuss 5 ways to get your company ready for equity crowdfunding, so that you are ready to take advantage of this new financing opportunity when it soon becomes available.
Below is a summary of the key points mentioned in this week’s Equity Crowdfunding video:
Equity crowdfunding will give your company the ability to raise up to $1M in any consecutive 12-month period by selling stock to a large number of investors. Unlike other crowdfunding alternatives, equity crowdfunding is not reward or donation based, and the investors actually will own a share of your company.
Although equity crowdfunding is not yet legal to use, it is important to think about the possibilities of this new way to raise money before it becomes available in 2014.
5 Ways to Get Your Company Ready for Equity Crowdfunding:
1. Prepare Your Company’s Story:
- Start preparing your company’s story now, so that you are ready to explain why potential investors should invest in your company.
- Prepare your company’s business plan, which should include your business concept and prospects, as well as an overview of the business risks, current finances and management team.
- Know your business and be prepared to answer questions from investors about your company.
2. Gather Your Company’s Info:
- Review and start preparing the information required under the SEC’s regulations.
- For example, you will need to explain, among other things, the company’s business, how the company will use the proceeds raised, its ownership structure and the terms of the financing. You also will need to provide to investors financial statements and a relative narrative explaining your company’s financial condition.
3. Hire an Accountant:
- Find an experienced accountant who can help you prepare the disclosures and financial information that you will need to provide to potential investors.
- If you plan to raise $100K to $500K, then you will need to provide to investors U.S. GAAP compliant financial statements that have been reviewed by a Certified Public Accountant.
- If you plan to raise more than $500K, then you will need to provide to investors U.S. GAAP compliant financial statements that have been audited by an independent auditor.
4. Hire an Attorney:
- Find an experienced attorney with a strong background in finance and who has helped companies raise money and who knows how to navigate the securities laws.
- Put a solid legal team in place that will help you manage a large shareholder group and understand the ins and outs of corporate governance matters.
- Because your company will need to make certain disclosures and regulatory filings with the SEC, your attorney must understand this regulatory process and the disclosures required under the SEC’s regulations.
5. Get Social:
- Evaluate your company’s website, blog and social media accounts to extend the reach of your network, so that they are available as a positive resource when you are ready to launch your equity crowdfunding campaign.
Let us know if you plan to use equity crowdfunding and what steps you are taking now to get ready for equity crowdfunding by leaving a comment to this week’s video.