Equity Crowdfunding –– Too Many Investors?
One of the most common fears entrepreneurs have before starting a campaign is dealing with “the crowd” part of Equity Crowdfunding. Unlike Kickstarter – where someone chips in money and you can just write them a thank-you note and say goodbye – Equity Crowdfunding involves a longer term relationship with those who invest in your business.
Which sounds terrifying! How are you supposed to keep up with hundreds of individual investors, and make sure all of them get what they’re owed in returns? And I don’t know about you, but my taxes are already complicated enough!
You want to raise a lot of money, and the way to do that is to have a lot of people invested in your company. But the logistics side of this can make it seem like the more successful you are, the harder and more complicated your job is going to be.
The reality couldn’t be further from the truth. Having a crowd of investors is advantageous for a number of reasons. You’ll have total and complete creative control over your dream company. And if you’re honest with your investors, and convey both your excitement in your company, as well as the understanding that you’re asking them to embark on a journey with you, you’ll have a crowd of supporters cheering you on at every turn.
What you won’t have is what happens all too often with venture capital and angel investors: one big investor who thinks they have the power to tell you what to do and how to run your company.
Picture it like this:
With Equity Crowdfunding, you’re an entrepreneur rockstar. You have a huge crowd of cheering fans who celebrate your victories and mourn your losses with you along the way. They have the privilege of being VIPs and when you make it big, they can say they’ve “been with the band” since before it was cool. They’ll get excited when they see your product in the store, and share your Facebook ads with their friends. Plus, you’re the one leading the way to making them really rich! (Maybe!)
With a Venture Capitalist, you have a wealthy (hopefully benevolent) overlord who thinks your logo should be green, not purple, and that your product should be marketed to the wealthy one percent, not everyday Americans. You can’t say no to them because, well, they’re paying for the whole company to succeed.
The average Equity Crowdfunding campaign has over 300 investors. Your obligations to them include sending annual updates on your company’s financial reports, and keeping track of their email addresses so that you can stay in contact with them.
If you have a mailing list for your company (which you should!) you already know how to do this. Type up an email detailing how your company is doing, and hit send.
You’d be responsible for sending the same email reports, if not more often, to just one angel investor each year. Yes, you’re responsible for updating hundreds of people, not just one. But it will take roughly the same amount of work to send that update out.
And if you’re worried about keeping track of their email addresses, well…how often do you change your email address? I’m guessing not that often.
As for investor returns, you can have the same automation set up with payments as you do with email lists. I’d recommend finding a service that can take all your investors’ information, along with the percent profits they’re owed, and set it up to automatically pay them out whenever that time comes.
It’s all just part of the process. If you want the guiding iron fist of one big investor, then be prepared to compromise on your dream. If you want to be an entrepreneur rockstar, with hundreds of people cheering you on and full control over your business, then Equity Crowdfunding is the way to go.