It’s FAQ Friday! Every Friday we answer common investment crowdfunding questions.
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What is investment crowdfunding?
Investment crowdfunding is a new type of investing that was opened to the public as part of the 2015 Jobs Act. Now, businesses can take back control over how they receive and allocate funding by setting their own terms. This new method allows new ventures to raise money from their community alongside bank loans & traditional angel funding. On average 70% of the funding in a $1M public community round is from new accredited investors while 80% of the number of participants are non-accredited.”
Alternatively, people can invest money in their geographic area instead of just the stock market. You shop locally, why not invest locally too? Watch your money go to work and see the physical results unfold in front of your eyes.
For example, a high growth tech company has a B2B2C play and leverages its investors to act as sales agents and a method to create a broader opportunity to get intros to strategic B2B channels or supply chain partners.
You can also contribute to main street businesses. Imagine a new brewery is planning to open in your area. You like craft beer and decide to invest $100 to help the brewery open. Your friends also like local breweries, and each decide to invest $100 as well. Fast forward to the brewery’s grand opening, and you and your friends are enjoying the business as patrons watching the community come together in a new main street business. You played a direct role in building up your city and get to see financial returns as well.
Over 80 industries have raised $3.5B this way and share in the returns, both monetary and bragging rights, of a successful venture scaling.
How is this different from Kickstarter?
As one of our partners said, it’s like “grown-up Kickstarter.” The main difference between investment crowdfunding and Kickstarter is the type of return you receive. With Kickstarter, you typically receive a tangible prototype of the product or exclusive access to the product once it’s launched. On the other hand, investment crowdfunding provides access to potential financial returns from revenue shares or dividends, a sense of community from growth in small businesses, and tangible growth from watching your city develop.
What does this mean for founders?
Founders now have more options for raising capital on friendly terms and sharing any returns with those who believe in them and can help their business grow. Compared to Venture Capital which funds 2% of the companies that come their way, private accredited & public investment crowdfunded offerings have a 60% success rate of founders hitting their target goal. In addition, those same businesses have seen 23% Year-over-Year growth rates on average.
So, what does this mean for me?
You’re an investor, you just didn’t know it! Access potential financial returns by investing in businesses where you live. This provides a more connected relationship to the place you love to live in. You can play a direct role in your locality and state’s economic growth while seeing the results being built before your eyes. Just like Kickstarter, or your online account where you invest in the stock market, there are digital platforms to learn about the business, understand what the money will be used for, see what questions are being asked, and directly invest.
How do I get involved?
For founders, we’d be happy to teach you about investment crowdfunding and help you identify opportunities to potentially improve investability. Visit our website to learn about Incolo Runway and contact us to get started.
For potential investors, there are many options for you to see offerings in your area and decide if you would like to invest. https://incolo.io/invest/.