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Companies perspective:
OK, so the pieces of he Crowdfunding puzzle are coming together now, but perhaps you are wondering what is in it for the companies opting to do crowdfunding. Great question. First off, you should know most companies going this route are not publicly traded and are privately held. So the options that a
Public company would have are not available to them. However as in the case of True Leaf there are clearly some benefits from the company's perspective. First off, with CF your investor criteria can be relaxed, aka you do not need to lure the wealthy to get your funding. You can simply collect smaller amounts of funds from a crowd of smaller walleted investors. Another attractive factor is that the cost to do a CF are significantly less that via other means such as a publicly traded company doing a IPO.
From the investor's perspective:
You might be wondering what’s in it for me? And of course that is a question that needs to go through the head of every potential investor. I would like to explore the idea in general and through the lense of one specific type of crowdfunding. In a nutshell we can break the potential benefits down as follows: 1. Divided, 2. Public, 3. Bought, 4. Secondary Market.
Let us explain those four points above:
Dividend: So eventually the company you have invested in will become profitable and overwhelming piles of csh will be rolling in. Well of course that is the dream and the likely motivator behind why we consider such an investment. This is where the company would start paying back to its investors and typically on an ongoing and continual basis. At the principle, this would be no different than collecting a dividend from say General Electric. Well yes, it would be more exciting, but the point I am trying to make here is that you could see your return come back to you in the form of a dividend.
Public: There is always the possibility that the company you have invested decides to go from being a private company to a publicly traded one. This would allow you to trade or invest in your company much like you would for other well known established companies on the market, such as Canopy or MedReleaf Corp. for example. Typically when this happens, at least in the current market conditions for such companies you can expect the value of your shares to go up nicely compared to what you initially got in for.
Bought: The company that you have invested in could end up getting acquired by another company. Chances are then you could end up being paid in cash or possibly in shares of the purchasing company. Typically when this happens you can expect to receive a fair amount more than you had initially bought in at.
Secondary Market: This option may not seem as obvious or as lucrative, but there is a possibility that you could sell the portion of the company you have acquired through CF to another potential investor that may have missed the initial opportunity to get in. You could essentially think of this process as a transfer from one investor to another. The liquidity or availability of this option is very thin in comparison to buying or selling a publicly traded company, however this is still a potential option and way you could gain from CF.
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