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What is equity crowdfunding? How can it help small businesses raise venture finance?
Securing venture finance is a challenge
Small businesses (start-ups, early stage and more established companies) are the lifeblood of our economy. With the right investment and support, ambitious small businesses don’t stay small for very long. But traditional venture finance is difficult to access. It’s not easy for businesses to reach out to business angels, angel networks and VCs.
A lot of time can be spent chasing investment, rather than focusing on growing the business, which means that some potentially great businesses might never reach their full potential.
But behind every challenge is an opportunity
Equity crowdfunding offers small businesses with high growth potential the opportunity to raise investment online from a ‘crowd’ of sophisticated investors.
So how does it work?
Here’s an outline of the Growthfunders process…
Sign Up - You can become a GrowthFunders member as long as you’re over 18 and a UK resident. It’s also free.
List Investment - Complete a questionnaire about your business - with a video pitch, if you like. Detail how much money you want to raise and the amount of equity you’re offering in return.
Review - GrowthFunders reviews your investment proposal and checks it for fairness, accuracy and growth potential. If successful, your business is added to our portfolio for investors to consider.
Investment - Starts from £100 right through to the full amount you need. The campaign remains open for 90 days or, if your investment target is reached, we move to ‘Close Out’. If, after 90 days, the full amount has not been reached, investors get their money back.
Close Out - When the total investment has been reached, we carry out due diligence and ask you to formally make the share offer and sign all of the investment documentation. GrowthFunders buys the shares on behalf of the investors. Our charges are 5% plus legal fees.
Post FundingSupport - We hold the shares as nominees for the investors and post progress reports of your business online. Also, all investors want to see your business succeed and many may be experienced entrepreneurs with a wide range of skills and expertise who are happy to engage with you and offer mentoring assistance.
Payments - Any money your business makes - dividends, sale or floatation proceeds - we pass directly to the investors. And if it doesn’t work out, you owe nothing. As equity stakeholders, your investors share the risks with you.
So if you are an ambitious start-up, early stage or established business with the potential to grow - and need the funding to kick start your growth plan - then equity crowdfunding could be for you.