With the recent passage of the JOBS Act making equity crowdfunding possible, there are many people eager to jump in and get started with their new ideas. What could be more exciting than matching your idea with eager investors, who want to help bring that idea to life and bring more profits to all? However, what many fail to realize how important it is “to look before you leap,” or you may see your idea crash and burn instead of thrive and succeed. According to the CrowdFund Intermediary Regulatory Advocates, following these six steps to be ready for funding may help you be better prepared before entering into the arena of equity crowdfunding:
- Be established and incorporated. In order to have the ability to issue the shares that you are promising through the crowdfunding, you must be established and incorporated the correct way. If not, you will delay your ability to raise capital.
- Have a clear plan. For your plan to be clear, it must be more than well-researched and solid. Plan on having a high degree of transparency. No one wants to invest in a business in which they can’t see exactly what the plan is and how it is progressing. The law requires that the business plan, financial statements, and other disclosure documents be given to the SEC, the funding portal, and any investors, in order for the business plan to be eligible for equity crowdfunding.
- Make it shine. You only get one chance to make a first impression, so when you are creating the materials for your presentation, make sure that they highlight and emphasize the benefits of investing. Having a business plan that is clear and easy to understand can also help gain investors.
- Create a solid financial statement. Doing your homework on your market projections, having accurate mathematics, and knowing the costs and value of your business are all essential. Accurate financial planning can be difficult and you may require professional assistance to get an accurate statement.
- Work with an accounting team that understands the process. The JOBS Act has requirements for different levels of fundraising. Being aware of these requirements, following the proper procedures, and being in compliance are all necessary to ensure that your crowdfunding succeeds.
- Prepare your networks. The number one reason that many crowdfunding campaigns fail is lack of network preparation. Statistics have shown that in order for your project to succeed, at least 30% of the funds should come from your own personal network.
Equity crowdfunding will open up opportunities for small businesses and startups to find the funding that they need to succeed. However, you have to be prepared for the challenges that come with it. The time and effort to make a crowdfunding campaign begins long before the launch, and requires time and effort to succeed. For more information on how you can utilize crowdfunding for your project, contact us. We would be happy to help you realize your goals through equity crowdfunding.