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The Power of the People: Four Reasons Why Smart Startups Crowdfund

Business.com / Last Modified: January 17, 2018
Photo credit: Fabrik Bilder/Shutterstock

Reg CF is changing the future of entrepreneurship, and the industry is taking notice. Success in equity crowdfunding is attracting larger investors. Here's an overview of Reg CF and how it can impact your startup.

On May 16, 2016, the U.S. Securities and Exchange Commission (SEC) enacted Title III of the JOBS Act and approved Regulation Crowdfunding in the biggest change affecting how we invest since the 1930s. Regulation Crowdfunding (Reg CF), or equity crowdfunding, enables a new kind of entrepreneurship by letting startups accept small investments from non-accredited investors – regular people.

Equity crowdfunding gives everyone – regardless of whether they're a student or an experienced investor – the opportunity to invest in an idea they believe in and to own a piece of a high-growth company. It also means founders are no longer limited to raising funds from angel investors, venture capitalists and banks. With Reg CF, founders are empowered to build their businesses with direct support from the very communities they serve.

Many growing and successful and startups are crowdfunding. Here are the four main reasons why.

  1. Word of mouth. When it comes to marketing, nothing beats word of mouth. Reg CF turns strangers into your customers and your customers into your champions. Running an equity crowdfunding campaign doesn't just give customers the chance to be part of your story; it gives them the opportunity to invite their peers to be a part of your business. This approach has led to startups doubling and tripling their user bases, all while raising hundreds of thousands of dollars from hundreds of investors. 

  2. Massive exposure. Equity crowdfunding doesn't just expose you to potential investors; it's the opportunity to be seen by new potential customers, partners and your industry as a whole. In addition to preselling millions of dollars' worth of products, one agritech startup was featured by the World Health Organization while raising funds for their prototype on an equity crowdfunding platform. Crowdfunding gives your startup the chance to be seen by millions worldwide. 

  3. Create a loyal community. While product crowdfunding gives contributors the chance to support a particular product, equity crowdfunding creates long-term relationships with investors who resonate with your mission. This creates a loyal community of fans and evangelists you can count on. It's the difference between being managed by your investors and building something amazing with their support. Rather than getting a single investor or small team with venture capital options, you can get hundreds of passionate people showing their support for your success and pushing your progress. 

  4. Discover and engage your biggest supporters. While marketing campaigns produce customer acquisition, raising through a crowdfunding campaign produces customer acquisition and the opportunity to engage directly with those customers. A Reg CF raise gives you more than data, names and prospect lists. It gives you faces and relationships. Accredited investors are only a fraction of the people whose lives your company is improving. Equity crowdfunding lets you connect with the people you're building for.

Reg CF is changing the future of entrepreneurship, and the industry is taking notice. Success in equity crowdfunding is attracting venture capitalists and larger investors. 

From early-stage companies to mid-stage, venture-backed companies, businesses are harnessing the power of the crowd to raise capital and awareness, bolster loyal customer bases, and attract investment. More and more, founders are leveraging the power of equity crowdfunding to build the future.

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