Seed Capital, Startup Capital, Expansion Capital and MoreSome people believe that equity crowdfunding and Texas intrastate crowdfunding were invented specifically for startups. This belief is certainly not 100% true, equity crowdfunding is for companies of all ages, but there is some truth to it. The Jumpstart Our Business Startup Act, or JOBS Act, was signed by President Obama on April 5th, 2012. Title III of the JOBS Act was designed to set the rules for crowdfunding, and most importantly, equity crowdfunding. Although equity crowdfunding originated in a government Act for startups, that doesn’t mean only startups can utilize its power. In fact, your business can be 100 years old and raise capital via equity crowdfunding if you have an effective pitch and the skills to make your campaign work.
In yesterday’s blog we discussed why Texas intrastate crowdfunding is perfect for small businesses. Equity crowdfunding may be perfect for small businesses but it can also help medium-to-large scale businesses raise capital they need as well. As we mentioned yesterday, there is no need to go through the hassles of venture capitalists to raise $100,000, $500,000 or even $1,000,000. Texas intrastate crowdfunding was approved by the Texas State Securities Board to give companies an alternative to VC’s and access to capital from fellow Texans. With that said, Texas equity crowdfunding is ideal for companies just starting out, entering a new market and/or looking to boost marketing efforts.
Today we will discuss five types of funding to raise with Texas intrastate crowdfunding. This will help companies understand what type of funding the need to raise and give them a more clear perspective on the entire equity crowdfunding process. Enjoy!
Seed Capital is aptly named because the money raised will be the metaphoric seed you plant for your company to grow. Businesses seeking Seed Capital have no product or organized company – yet. The capital raised here can be used for anything from creating a sample product, hiring employees, renting office space or paying for administrative set-up costs. Your equity crowdfunding campaign for Seed Capital will need an informative and persuasive pitch on your company/product to make investors believe in its potential and pledge money. With no sample product or finance reports, your pitch will be the one tool you have. Very few VC’s invest at this stage, and if they did, it would be a very small amount. Texas intrastate crowdfunding is a much more sensible decision.
When raising Startup Capital, businesses, typically have a sample product ready and the administrative team in place. Capital here can be used for a wide variety of company-related needs including hiring key management personnel, additional market research, large scale product manufacturing or additional staff hires. Truthfully, the use of Startup Capital will depend on a variety of variables and will be up to the CEO running the equity crowdfunding campaign. Your pitch will now feature the product/service you’re funding and you can also share details about your small but growing team. VC’s rarely offer funding at this stage either.
Early Stage Capital
Early-stage companies are generally considered businesses who are 2-3 years into operation. At this point your company has been functioning at a steady pace, your management team is set and sales are increasing. Again, the capital you raise here can be used in a variety of ways. Companies just getting by could use equity crowdfunding to increase efficiency or improve marketing for higher sales. Companies who are flourishing could add employees, move to a larger office or increase product production. VC’s may be interested at this point, but if you only need to hire 2-3 more employees it is not worth the time and hassle of the venture capitalist hoopla.
Expansion Capital is the fuel to truly take your business to the next level and considered Late Stage Investing. Your company is fully established, you’ve created a customer base and you’re ready to make a giant leap forward. Expansion capital can be used for entering new markets or whatever it takes to catapult your business into the next phase of success. When creating your Texas intrastate crowdfunding pitch for Expansion Capital, you should highlight all of your past success and why you are primed for success in the future. It is certainly an exciting time to raise capital!
Late Stage Capital
Late Stage Capital is entirely dependent on what the company needs at this stage in their life cycle. For example, one company may need $400,000 to open a third location 100 miles away. Another company may want to add an internet marketing department and needs $600,000 to pay for salaries, benefits and so forth. The point is, if you have a need and can create an equity crowdfunding campaign that will influence investors to back you, the power is in your hands.
The widespread belief that equity crowdfunding is only for startups is false but understandable. If a person doesn’t know much about Texas intrastate crowdfunding or equity crowdfunding in general, they probably don’t know much about its capabilities and who can use it. truCrowd Texas is proud to serve the entrepreneurs and investors of Texas, so if you have any further questions on this topic, please feel free to call, chat or email the team.
Thank you for reading and please leave your questions and comments below!