Fundraising Strategy for Early-Stage Startups (№3 of Series)
An Alternative Startup Fundraising Strategy — Equity Crowdfunding
This is the 3rd article in the early-stage startup fundraising strategy series. You can find the links of related readings at the end of this article.
Crowdfunding has not yet become a norm when startups do equity fundraising. One main reason is that venture capital has emerged and has become a mainstream approach since the launch of Kleiner Perkins and Sequoia Capital in the 1970s. Access to investing in private companies was essentially not feasible for most non-accredited investors until the implementation of Jumpstart Our Business Startups Act (“JOBS Act”) several years ago.
1. WHAT IS EQUITY CROWDFUNDING?
Crowdfunding literally can be interpreted as funding from the crowd. Since the JOBS Act, equity crowdfunding has been evolving and has become an option for startups to get capital instead of VCs. In narrow terms, equity crowdfunding refers to fundraising by companies according to Regulation Crowdfunding (“Regulation CF”). Such crowdfunding can only be made through an online platform operated by an intermediary (“Intermediary”), which is either a registered broker-dealer or a registered funding portal. However, depending on the…
