Equity crowdfunding needs to change
Crowdfunders don’t like most businesses: Existing crowdfunders typically focus on technology start-ups and early stage businesses, and they target investors who like those opportunities. The vast majority of businesses aren’t in these categories and are turned away, yet they can have just as much potential and are typically more attractive to investors wishing to invest in a lower risk portfolio.
Crowdfunders are expensive: With fees on the business typically upwards of 7% of the amount raised plus payment processing fees, the injection of cash provided to the business for growth is significantly reduced.
Crowdfunders lock investors into their investment: Very few crowdfunders allow investors to sell their investments by themselves; they have to hope for the company they’ve invested in to be sold.
Crowdfunding is limited to minority raises for growth capital: Crowdfunders don’t transact other types of deal, such as retirement sales or employee buyouts. Investors could be offered fantastic value for money even for deals where the shareholders are receiving some or all of the crowdfunding proceeds. Where it can be demonstrated that business growth can be seeded through a change of shareholders, new investors are missing out on opportunities.
Crowdfunders don’t pay dividends: Because start-up and early stage companies are the focus of current crowdfunders, investors are told not to expect ongoing dividends — because the company doesn’t expect profits for the first few years.
Crowdfunders have limited investor reach: Although a minority of crowdfunders are beginning to reach target investors in a few selected countries most focus only on their own country. Because of this, many fundraises finish incomplete, and the company has to decide whether to accept a lower amount or cancel the raise altogether.
Investx is solving these problems using new technology.
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