Equity crowdfunding is an exciting method of startup and small business financing available to entrepreneurs. And now with Title III of the JOBS Act in effect, your pool of potential investors got a lot bigger as average individuals (not just accredited investors) are now able to make investments. As an entrepreneur, what do you really need to know?
1. You can raise up to $1 million per year.
Title III of the JOBS Act allows you to raise up to $1 million annually for your startup or small business, but you can do it through multiple campaigns. To determine how much you’d like to raise in each round, you should think about what it will take to get you to the next significant milestone. Raising in smaller rounds can help you establish legitimacy and increase your valuation for future rounds, meaning you can raise more capital and give away less equity.
2. Anyone can invest.
Title III of the JOBS Act opened the doors for average people to invest in startups and small businesses. Anyone can invest at least $2,000 in as many businesses as they wish. That means your friends, family and colleagues can now help you build your business and benefit from it.
3. It can only be done on a SEC-registered and FINRA member funding portal, like Jumpstart Micro.
Each equity crowdfunding portal has to go through robust approval process with the SEC and become a member of FINRA. We’re also required to follow specific rules and regulations set forth by both organizations. At Jumpstart Micro, we first help walk you through the steps to start your campaign and set you up for success. Then, we help you connect with investors, those in your network and in ours.
4. Any type of business is eligible.
While most of the funding news you hear centers around technology companies, equity crowdfunding is for any type of business. As long as you’re offering a product or service, your business is eligible for equity crowdfunding. Whether it’s tech, consumer products, retail, real estate, a restaurant, or even a franchise, all you need is a US bank account and your business plan…
5. Your business plan is key.
No, you don’t have to have it all figured out. The best business plans evolve and change as your business grows and matures and you learn more about your customers and target audience. But, you should have one – in fact, you need one. Defining your value proposition, knowing your target market, financial projections, and overall strategy will be important for investors to understand your business and why they should invest in you. You’ll also have to provide information on your management team and plans for the future, including how you’ll use the funding.
Still not sure if equity crowdfunding is for you? Contact us for a FREE consultation.