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5 Things You Need Before Raising Capital Through Equity Crowdfunding

September 02, 2016

Read Time: 3 - 5 minutes

Getting funding for a startup is far from simple. As a founder, swimming through the ocean of articles on developing the best pitch, or strategies to get funding can get pretty tiresome. While equity crowdfunding doesn't require an elevator pitch, we may have found some interesting strategies on putting together a successful equity crowdfunding raise. 

Raising Capital From Equity Funding Investors

With three months in the books, equity crowdfunding has seen over $7 Million in total money raised, but in the last 3 weeks we have seen more startups hit their funding minimums in a matter of days. What do they know that other businesses don't? 

The pioneers of this platform have helped shine a light on what it takes to raise capital through Reg CF, and it seems like founders are beginning to shift in how they approach the raise. As we mentioned above, the month of August saw three startups raise their minimum in under two weeks, which is a massive improvement from their predecessors.

We can't promise you that these guidelines will translate into immediate success, but this is what stood out to us when looking at the data of how to get investors*:

  1. The Crowd Matters - Having a customer base or niche community has helped get funding off the ground, and expose the platforms to larger audiences.
  2. Minimum Investment - 70% offered initial investments of $100 or less.
  3. Minimum Funding Goal - 67% put their minimum goals under $75,000, and raised 414% funding on average. 
  4. Debt/SAFE -  67% used this as their securities
  5. Prior Funding - Just under 50% had some type of prior funding round. 

*Data Sourced by nextgencrowdfunding.com

Before you think about raising money through equity funding, it also may be a good idea to line up at least 20% of your capital before you launch your campaign. If you look at investor psychology, and the data behind Kickstarter and other crowdfunding campaigns, you will see the crowd mentality kick in. Campaigns that have a steady flow of capital or hit their minimums tend to grow exponentially as other investors, who are less knowledgeable about a particular business, trust the crowd in their decision on whether or not to invest. 

Digging Into the Data

Next week, we tackle more interesting data points, and see if we can draw correlations into what may go in to a successful raise. In order to get an exclusive look, be sure to subscribe in the box above or create an account using the button below. You can also check out our previous report here.  

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* Data sourced from nextgencrowdfunding.com and equity crowdfunding portals