What are the 3 phases of Equity Crowdfunding?
Raising capital is an essential part of any business venture, and for most, it can be a challenging and time-consuming process. However, thanks to modern technology, companies can now leverage various virtual platforms to simplify and expedite the capital-raising process. These platforms offer companies a low-barrier-to-entry option for accessing a large pool of potential investors.
In Australia, popular crowdfunding platforms include Birchal, OnMarket and Equitise. In America you have Republic and Wefunder, and in the UK & Europe you have Crowdcube and Seedrs (now merged with Republic in the US).
The process of raising capital through these virtual platforms usually takes around nine to 12 weeks and can be broken down into three distinct phases.
Preparation Phase
The first phase is the preparation phase, where companies work on their marketing and communication plans. The centerpiece of this phase is the campaign video, where the company must distill its message to its simplest form.
Expression of Interest Stage
The second phase is the Expression of Interest campaign. This phase is focused on attracting non-binding indications of interest from interested investors. The information received from investors is high level, including contact details, their investment preferences, and how much they would be willing to invest. This data is vital as it helps companies gauge the level of investor interest in their opportunity, which in turn helps with engaging investors and prioritizing them.
Offer Stage
The final phase is the Offer stage, which follows quickly after the expression of interest campaign. The information gathered during the campaign is crucial in shaping the offer and finalizing the materials. During this stage, investors make binding commitments to invest, and the capital-raising process is complete.
It is essential to note that not all campaigns are successful, and companies need to manage their expectations when raising capital. Virtual platforms offer companies the opportunity to get out there and start engaging with investors, but it still requires effort and resources to attract investor interest.
Remember that momentum and scarcity are key to a successful capital raise. The more activity there is during the expression of interest campaign, the more likely investors are to commit. Companies need to be strategic with their marketing plans and spend to attract the right investors and ensure they reach their funding goals.
In conclusion, virtual equity crowdfunding platforms are a game-changer for companies looking to raise capital. These platforms offer a unique opportunity to access a large pool of potential investors, but companies must be strategic in their approach to ensure they attract the right investors and achieve their funding goals.
