Who can raise equity investment?
Feb 21, 2022
In order to sell shares in your company, you can’t be operating as a sole trader. Equity crowdfunding campaigns are for registered, limited liability businesses and PLCs that want to offer shares in their companies in exchange for investment.
Companies can be pre-revenue but you need some traction under your belt - you’re unlikely to attract substantial investment with simply an idea. So while you may not yet be generating revenue let alone profitable, showing some form of traction is critical. Examples of traction include the launch and growth of a freemium model, building a user base, and letters of intent from potential business customers. That said, however, there’s no denying that having recurring revenue is attractive, it shows investors that you have proven your concept because customers are buying what you have to sell.
'Equity crowdfunding campaigns are for registered, limited liability businesses that want to offer shares in their companies in exchange for investment.'
There are no real restrictions on industry type and both B2B and B2C companies can crowdfund. Although you’re probably more likely to come across a B2C campaign when you’re perusing the platforms, B2B campaigns have had much success. In fact, sometimes having a slightly different proposition can work in your favour.
Irrespective of economic conditions and the dire warnings from naysayers, there’s always investment money around for sound business propositions. The trick is ensuring that what you present is compelling with a clear message on what’s in it for the investor.
Sidebar alert, a crowdfunding campaign needs to be led by a senior member of the business, ideally the founder(s). Although you can, and should, get other team members involved - particularly in terms of ‘spreading the word’ to a wider network, it’s really important that the person who takes the lead is actively involved in the business’s day-to-day key decision-making. The cliché is true, people invest in people.
Try out our readiness tool today to see if now is the best time for you to equity crowdfund.
