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Equity Crowdfunding for Your Business
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EQUITY CROWDFUNDING for businesses has exploded , and has helped to fund successful enterprises such as Brewdog and Mondo Bank . It can be a fairly long process and requires more time than a standard business loan , but Lee Nicolaou , Digital Marketing Manager for business funding experts , Businessagent . com , shares what should be expected and where to start .
Raising finance for a business can be stressful , and quite frankly , not as easy as what it once was . With the major Banks lending less to businesses , it can be a struggle to reach the growth and potential you ’ re looking for , but with the alternative finance market growing , business owners now have another avenue to try .
THE PLAN
First things first , a clear plan is needed ; What needs to be achieve ? How is it going to be achieved it ? Who is going to achieve it ?
Firstly , key information is needed and a 50 page documents is not always the best route to take .
Investors and equity crowdfunding platforms can be turned off by this . It needs to be short , snappy and smart about what is included in your business plan .
Write up in effective and efficient , yet informative way , include a vision and mission , details of the product and service and why this differs from what is already available in the market .
Next , give details about the management team , this is very important . What qualifications and past experiences they have to guide and drive the business forward .
Cash flow forecasts should be included and the expectations from the business ; how much will it make once investment has been made – it is good to be as realistic as possible at this point .
How is the product to be marketed ? Competitor analysis is important , so don ’ t be afraid to be innovative with the plan , try and stand out , give it some sort of edge , after all the whole point is to attract investors to invest .
EQUITY OFFERED & VALUATION
There is a need to consider how much of the business should be given away , as well as bearing in mind , if planning on multiple funding rounds ; some equity will need to be considered for the future .
Firstly , a straight valuation is needed if intending to offer 25 % of the business for £ 250,000 then the business should be valued at £ 1m . Is that a reasonable and justified sum ?
Figures have to be justified . When valuing the business there is a need to consider the value of the assets , the cash in the business , discounted cash flow for future projections , the valuations within the industry , the current profit and loss , the revenue and the projected sales as well as the value in your existing staff .
Again , be realistic - valuing too high will make investors less likely to invest as they will be expecting a higher share for their cash . Be reasonable , but also be comfortable with the amount of equity you are giving away .
THE BUZZ You trust the business is a great idea , and believe in it , now it ’ s time to make everyone else feel the same .
Potential investors need to be as excited and a good place to start is a video to highlight the strengths as a business . A short video to explain what it ’ s all about should be on the checklist .
Make it fun , short and sweet , keep viewers engaged and interested . Also , get it online and on social media . Showcase across Twitter , Facebook and Instagram and engage with customers and potential users .
It ’ s a great ( and FREE ) marketing tool to get the business known and visible , and with the option for a paid ad service , that can increase the marketing even more . Create some noise around it and why it ’ s so exciting and exclusive .
PLATFORM
The equity crowdfunding market has grown at such a huge rate and there are now a number of great platforms to choose from .
When it comes to picking a platform to raise with , look at what suits best . By this I mean look at the charges , what percentage the platform will charge and do they also take a share in your business .
Research and consider the types of businesses they have previously funded and what type of investors they are likely to have . Try and find a platform that suits and is likely to be the most relevant for the business .
BE CLEAR
One of the most important things is to be clear . If the business or plans are confusing interest will be lost . Ensure that the primary business function is understandable and the plan to reach the business goals are clear and mapped out .
When it comes to an exit plan be straight forward and honest ; how are investors going to see a return ? Most importantly , have fun with it , it ’ s an exciting opportunity for the business and it ’ s certainly one of the most fun ways to raise cash !
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LOCKSMITHJOURNAL . CO . UK | SEP / OCT 2016