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Equity Crowdfunding, Angel Investors or VC - Why not all three?

What is the best way to raise equity finance?

 

We are often asked by entrepreneurs, what is the best way to raise equity finance? It’s a simple question but one which doesn’t have a definitive answer!

The best means of raising equity finance for your business depends on a number of different factors, as well as the individual entrepreneur.

For example...

  • What stage is your business at?
  • How much investment do you need?
  • How quickly do you plan to scale your business?

We are advocates of equity crowdfunding - and we are also advocates of co-investment

We are, obviously, big fans of equity crowdfunding and believe that there are major benefits associated with raising equity finance from a crowd of serious investors. 

But, it is fair to say, we are also supporters of traditional equity providers such as business angels, angel networks and VCs.

There are some brilliant angel investors out there who are in possession of a wealth of knowledge and experience in their given fields. 

The same is true of VCs. The key is identifying, establishing a connection and engaging with those where there is both chemistry and a strategic fit.

This can be incredibly challenging – especially for those in the start-up or early stage of their business development.

  • Where do you look?
  • How do you know who to approach?
  • Is there a prescribed format for making an approach?
  • How do you ensure that you provide them with what they need in a format that communicates to          them?
  • Do you have the time and resources at your disposal to achieve this?

Equity crowdfunding - a quick, streamlined process for raising equity finance?

If you are a lean team, then it is likely that developing and testing your business model is your primary concern and main area of focus – it ought to be if you are adopting lean start up methodology!

This is where we believe crowdfunding can really come ‘into its own’ – adopting a crowdfunding strategy to raise seed capital for your start up or early stage business fits like a glove with the ethos of lean, enabling entrepreneurs to access a wider investor base and gain vital feeback during the fund raising process.

The strategy for raising venture finance via an equity crowdfunding platform is the same as raising finance from business angels, angle networks and VCs - the difference is you are pitching online rather than face to face!

Start to raise investment for your company today

So is it possible, therefore, to raise funding from all three sources?

Absolutely! Angels and VCs already co-invest across projects and have done for years.  So why can’t a wider crowd of serious investors fit in alongside? 

The crowd is, in fact, made up of a large proportion of ‘latent’ angel investors.  During our own development process, we have encountered a large number of fantastically talented, experienced and well connected individuals who would not be immediately identifiable as ‘traditional’ angel investors but who would love to invest some smaller amounts of capital into a range of businesses with which they identify and whom they would like to help.

The key to facilitation is the legal structure of the crowdfunding platform’s arrangement.  When raising money from the crowd, it is important that the platform’s legal structure facilitates co-investment and follow on investment from the crowd, angels and VCs.

No ‘ifs’ or ‘buts’ – it can be done and the benefits for all concerned have the potential to be phenomenal and change the early stage equity finance landscape.

The power of three!

Imagine, if you will...

A great start up business that is in search of a sustainable, repeatable business model which kicks the start up into hyper growth:

  • Throw in £150,000 seed capital from the crowd
  • Develop, test and measure the business model
  • Gain some traction
  • Introductions to the ‘right’ angels and VCs
  • Second round funding – a mix, the ‘power of three’ – angels, VCs and the crowd

Crowdfunding – alternative or complementary?

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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.