Becoming an equity crowdfunding investor
If you’ve never bought shares in a company, the idea of supporting an equity crowdfunding campaign might seem daunting. This article is here to de-mystify what that means.
If I have a company, I can divide it into shares. If my company is worth $100,000, I could divide it into 100 shares that are worth $1000 each or I could divide it into 200 shares worth $500 each or I could choose any other amount.
When owners decide to do an equity crowdfunding round, it means that they are selling a piece of the company. They’ll choose how much they want to sell off. Anyone who buys any shares becomes a part-owner of the company and an investor.
Being an investor means a few things.
You get a say (usually)
As an investor, you’ll be invited to general meetings where you get a vote on any major changes to the company.
There is the potential you will get a return
This can happen in a few ways:
- if the company is profitable, you could receive an annual payment based on the company’s profits, if the company chooses to share them through dividends (this is likely to be a longer play — typically early-stage and growing companies do not pay dividends, instead they may reinvest any profits they make into growing the business),
- if someone is interested in buying shares in the company, you could sell them, or
- if the company’s business is sold, you would receive part of the sale price based on the amount of the company you own and rights attached to your shares.
That said, the company may also do future rounds of investment, meaning your ownership of the company percentage-wise could be diluted by the new shares that would be issued.
Investing in an early-stage company is risky. It can be hard to judge the likelihood of success with startups and growing businesses. Losing your whole investment is possible. This means you need to think carefully before you invest, and make sure you’re not investing more than you can afford to lose.
You’ll be helping the business do what it does well
A business can’t make money without providing a really great product or service. By investing, you’re helping that business do that. For some people, supporting the business is the sole purpose of becoming an investor.
The biggest difference with equity crowdfunding is that you will be investing alongside a crowd. As an example, Mungalli Creek Dairy received $749,288 in pledges from 402 people. Two of those people were Susan and Christine:
Mungalli Creek Dairy is a wonderful asset of the Atherton Tablelands. I am excited to be able to show my support by investing in it.
Could not be happier than investing in such an ethical, environmentally aware, Australian, community minded enterprise.
If you do want to invest
Make sure you read the offer document before you invest. If you have any questions, ask the company on the campaign page.
Check out the companies crowdfunding through PledgeMe here or learn how to invest here.
