Equity Crowd-Funding has established itself as a real complement and alternative to traditional equity funding sources for High Growth Potential Start-Up and Growth Stage businesses in Ireland in recent years.

Previously only wealthy individuals, venture capitalists and business angels could invest in startups. Equity Crowd-Funding platforms have helped democratize the investment process by opening the door to a larger pool of potential investors dubbed “the crowd”.

Equity Crowd-Funding may be considered an alternative to raising investment via Angels or Venture Capital firms – it is often in practice a complement to raising investment from such sources.

The long term impact of this alternative source of financing has yet to be seen, but it is clear that an increasing amount of funding is becoming available through these platforms. Equity Crowd-Funding may well be an excellent source of funding for some companies, but they should place close attention to the details of the offering and the level of work required to recruit investors onto the platform.

Raising Equity Crowd-Funding is not very different to raising equity capital from Angels and VCs in the following ways:

• Still need a strong investment proposition
• Still need to have a business plan
• Still need to have a fundraising campaign
• Still need to hustle a network of investors in the real world
• Still need to consider class of shares, use of nominee structure

Equity Crowd-Funding can lead to an investment by a high number of small investors – whom the company promoters may never have met.

For a High Potential Start-Up that may be pre-revenue, or early in its growth cycle, the potential benefit here is that a high participation rate of new small investors may signal a market validation/approval of the customer proposition and business model – possibly before customers or scaling revenues have a chance to so validate.

For a business that already has a sizeable customer base, Equity Crowd-Funding enables the business’ customer/stakeholder base to participate in the equity of the business and hopefully become advocates for it in their own networks. The platforms (and nominee structures used) enable and simplify the completion process with investors and simplify investor relations.

Get in touch with us today and learn how SME Finance Solutions can help your business.