- By Nathan Rose, Assemble Advisory
The content of this article has been adapted from Equity Crowdfunding: The Complete Guide For Startups And Growing Companies, launching on Amazon November 1. HelpTheCrowd readers can download the entire book for FREE, this week only. Click here to download.
Equity crowdfunding is a worldwide phenomenon, worth around US$2 billion, according to Cambridge University. Still, most literature has focused on each country in isolation – there have been reports on UK equity crowdfunding, articles on Dutch equity crowdfunding, and books on US equity crowdfunding – but very little on equity crowdfunding in totality, and nothing at all on what campaigns from different parts of the world can learn from each other.
This is strange, as despite all the regulatory detail, equity crowdfunding around the world has far more in common than differences. It’s time to join the dots.
To create the definitive resource, I spoke with 20 companies who have run successful equity crowdfunding campaigns, 12 leading platforms from all around the world, and a number of other experts at the forefront of the equity crowdfunding revolution. They are from the United Kingdom, the United States, France, the Netherlands, Germany, Sweden, Finland, Estonia, Canada, the Middle East, Australia and New Zealand. This is a truly global perspective on equity crowdfunding.
Today, I wanted to share with you a sample of some of the key takeaways, and insights that will be shared throughout the book.
1. Equity crowdfunding is a great way to boost the profile of a company.
“The publicity of the offer for us was great. And effectively it was free publicity. There’s not that many companies going on these crowdfunding platforms, and they have a lot of people looking at them. We were exposed to a network of several hundred thousand people, and that was invaluable.”
– Mark Hughes, Tutora, raised £150,000 on Crowdcube (UK-headquartered platform).
2. Equity crowdfunding is a lot of work. It can even be a full-time job. Start preparation well before when you need the money.
“If there’s one thing that people considering equity crowdfunding need to know, it isthat it takes significantly longer than you expect. And you need to be prepared for that.”
– Nathan Lawrence, Heyrex, raised NZ$816,000 on Snowball Effect (NewZealand-headquartered platform).
3. Valuation is still difficult, but equity crowdfunding is providing better visibility of comparable companies, with a growing database of past offers.
“It’s very hard to arrive at a right number. There’s no perfect mathematical formula to it. The valuation of an early-stage company is set as whatever an investor is willing to pay for it. To get to a number to go public with, startups should speak to professional investors (such as angels or early stage VCs) who are considering investing in your company and get their views.”
– Jaap Dekter, HelpTheCrowd, the European equity crowdfunding analytics platform.
4. Personal networks are important, but you can’t rely on them alone if you want to raise a meaningful amount of capital.
I had been asking my friends and family for help consistently for 3 years – to invest, to give feedback, to share and post things online. At some point, people can get tired of it. The first or second time, everybody is excited that you are starting something new, and they are happy to help – but the longer it goes on, their enthusiasm wanes, ‘Oh, here’s the latest email from Jasper, and he’s asking for something to do with crowdfunding again!’ There is a maximum amount of help you can draw out of your network before you need to go beyond that,”
5. People will wait until the last minute to invest, and will make up their minds based on what the rest of the crowd are doing.
“Once we reached 85%, it went really fast. A lot of people wait until they can see the offer is almost done before they participate. The last one or two days also went really fast, but that boost in the final days wouldn’t have happened if we hadn’t gotten close to our target.”
– Eric van Velzen, Nebu, raised €175,000 on Symbid (Netherlands-headquartered platform).
I will finish with a word from Ronald Kleverlaan – co-founder of the European Crowdfunding Network, and the author of the foreword to my book: “Because equity crowdfunding is still very young, it is important to look globally for good case studies of successful ways to attract funding.” This is very true. When different equity crowdfunding markets learn from each other, I firmly believe all of them will become stronger.
If you enjoyed this article, you can read a comprehensive overview of equity crowdfunding by downloading Nathan Rose’s new book, FREE on Amazon for this week only, featuring even more insights from HelpTheCrowd and many other interested participants in the crowd economy from around the world. Click here to get your copy.
Nathan Rose is the founder of Assemble Advisory, an agency for companies wishing to pursue equity crowdfunding campaigns, and the author of the upcoming book: Equity Crowdfunding: The Complete Guide For Startups and Growing Companies.