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5 Common Equity Crowdfunding Myths (And the Real Truth Behind Them)

Published on Apr 22, 2020 in Crowdfunding News

Equity crowdfunding has been generating a lot of buzz in the startup world since officially gaining legalization in 2016. For some companies, it’s already paying off—helping to launch new ventures and fast-track growth. Despite this early success, however, there’s a lot of misinformation flying around about equity crowdfunding. Today, we’re clearing up some of the industry’s most commonly heard myths and misconceptions. 

Myth #1: Equity Crowdfunding is just for big companies

Although it’s true that having an established growth trajectory is a huge advantage in equity crowdfunding, it’s not the only thing that matters. Companies with a high potential for industry disruption are seeing extremely early-stage traction in equity crowdfunding, as are companies with highly credentialed founders.

Myth #2: I can’t equity crowdfund if I’m not revenue-positive 

No, you don’t have to be revenue positive to stand a chance at equity crowdfunding. You DO have to have a realistic growth plan with a compelling path to profitability. As long as you can convince potential investors that your trajectory is viable, your early-stage revenue won’t make or break you.

Myth #3: Equity crowdfunding is the same as venture capital 

We could devote an entire post to the differences between venture capital and equity crowdfunding, but here’s the one that arguably matters the most to startups: Equity crowdfunding enables entrepreneurs to raise capital on their own terms, whereas venture capital negotiations are generally closed in favor of the investor. While your campaign terms will still need to be appealing enough to attract backers, you’ll be the one behind the steering wheel when you fundraise via an equity crowdfunding platform. 

Myth #4: If I run an equity crowdfunding campaign, “real” investors will be turned off

This pervasive myth is one of the most common reasons why startups turn away from equity crowdfunding, and it’s categorically untrue. In fact, a successful equity crowdfunding campaign can make your company MORE appealing to career investors. At the end of the day, a fully-funded campaign shows that your company has mass appeal, compelling value adds, and demonstrable traction.

Myth #5: Equity crowdfunding should only be used as a last resort

Equity crowdfunding is far from the last resort. For many entrepreneurs, it’s actually advantageous to attempt to raise funds via equity crowdfunding FIRST. A successful campaign will give you much-needed growth funds, demonstrate market appeal, and set a precedent for your valuation ask—all of which will give you more room for negotiations should you turn to angel investors for your next funding round.

With the equity crowdfunding market projected to reach $28 billion by 2025, there’s no time like the present to get in on this lucrative new trend. To optimize your chances of successful funding, apply to work with our team of experts today. We’ll set up your campaign, create and convert your global community, and help you pave the way for significant future growth.

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