equity financing

Crowdfunding for entrepreneurs and investors is a hot topic — and it’s only going to get more attention in the near term, as the American JOBS Act makes Equity Crowdfunding a reality for those looking to raise business capital with this innovative model. Creekstone Consulting Inc. wanted to dig deeper into this phenomenon and has developed an industry white paper to help explain how business owners and investors alike plan to use Equity Crowdfunding to revolutionize business models.

• Read our white paper on Equity Crowdfunding. Measuring the New ROI: Return on Involvement

Some of our key discoveries from talking with business experts and representatives from crowdfunding platforms gave us insight into how creative people are thinking about using this model to their advantage — and why it’s so important for countries like Canada to join the USA and Europe and get on the Equity Crowdfunding bandwagon:

• Equity Crowdfunding lets companies relatively easily create strong engagement with their consumer base which can become self- sustaining. Investors can be consumers as well as “evangelists” helping the company promote itself.
• Investors may seek out this kind of engagement willingly, seeing value in being able to “be part of something they believe in”.
• The equity Crowdfunding model can be very effective both for start-ups in the “idea” stage as well as mature companies that already have revenue. All participants gave particular attention to questions surrounding the motivations of both companies and investors to get involved in equity Crowdfunding.

Here’s an excerpt from our white paper:

Lopez concurs that many of EarlyShares’ signed-up companies are intending to use equity crowdfunding for publicity. “I can think of one company in New York City with 150 employees and millions in revenue and multiple locations… they’re doing a $500,000 raise for marketing purposes. They’re giving up 5 percent equity to have 5,000 customers. They will be able to say they’re partly customer-owned, and you’ve automatically proved customer loyalty.”

That marketing bonus is sustainable: “If they own a piece of your company, they will naturally want to buy from you. You get money, customers with a vested interest and market validation for your product before you even launch it. You can’t get that from a survey or a focus group!”

Contact Creekstone Consulting to learn more about Equity Crowdfunding or to use our management consulting services for meeting a wide range of business challenges