Industry Insights

Crowdfunding isn't all about the money - part IV

As well as raising venture finance, equity crowdfunding can also help to mitigate risk for your start-up.

We all know that research is not only a fundamental aspect of any start-up, it is also resource and time hungry and, as a result, it is often extremely difficult to gauge with any great certainty, market interest and demand.

Entrepreneurs sometimes (mistakenly) overtly rely on the feedback from (and the opinion of) friends and family – usually not unbiased or scientific. 

In some instances, start-ups fall victim to ‘entrepreneurial blindness’ which can be exacerbated by those close to them (all done with good sentiments, but with little commercial benefit).

It is vital that start-ups adopt an agile approach when developing new products and services. Here at GrowthFunders, we are big fans of lean start up methodology and if you know about lean start-up - that's great - we are on the same page!  If not, as an entrpreneur we would urge you to find out more here.

Equity crowdfunding and lean start up - they were made for each other

Is your start-up idea really that good?  Does it solve a genuine problem in the marketplace?

Raising venture finance via an equity crowdfunding platform is a great way to gauge interest in your start-up. You will need to produce a suite of investor documents.  

When listing on the GrowthFunders equity crowdfunding platform we encourage entrepreneurs to adopt lean start-up methodology.  

The principles of which are;

  1. Is there a problem in the marketplace worth solving?
  2. Are potential customers feeling pain?
  3. What are the current alternatives to your proposed solution?
  4. Will customers buy your product or service?
  5. Does your product or service form part of a scalable and repeatable business model?
  6. Get out of the building and speak to potential clients, validate your idea!

By going through this process and developing a suite of documents to support your equity crowdfunding pitch, you should already have established potential demand for your proposed product or service - Risk Mitigation Stage 1!

Listing on an equity crowdfunding platform means your start-up is now visible to a large audience of potential investors and advocates.  

Do they share your view on the potential of your start-up? Do they believe it solves a genuine proplem in the marketplace?  

Can they see customers needing and wanting your product or service?  Is your start-up scalable? You will soon find out!  

Questions, observations and comments will come from potential investors and advocates and this feedback is vital.  

Think of it as additional market research - if your start-up resonates then great - you will be in with a strong chance of raising the equity you need to grow your business - if not you will have some invaluable feedback and can use this to refine your business model - Risk Mitigation Stage 2!

Entrepreneurs are sometimes seen as risk takers with the astute ones taking measured risks and using every tool available to mitigate risk throughout the journey of starting, growing, developing and exiting a business.

Are you an ambitious entrepreneur? Looking to raise finance to grow your business? Download our Entrepreneurs guide - an introduction to online equity crowdfunding to find out all your need to know.

Start to raise investment for your company today

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Growth Capital Ventures (GCV) is backed by funds managed by Maven Capital Partners, one of the UK’s leading private equity and alternative asset managers.