You’re at that juncture in your business where you need to raise capital, and you’ve weighed the options for how to go about it. The arduous process of securing bank loans or investments from venture capitalists — and the loss of control over your business that comes with those options — does not appeal to you. You’ve made the decision to conduct an equity crowdfunding campaign. Congratulations! Now what?
There are so many platforms to choose from, it can be a little overwhelming. Do your research. Think of it like the home-buying process. Spend some time looking around each platform and picture your company there. Does it feel like a good fit? What benefits will you get, and what will it cost you? Look at the most successful campaigns happening across several platforms — you can learn a lot not just about what these campaigns have in common, but about the role the platform may be playing in those campaigns’ success.
To help you get started, here are four top equity crowdfunding platforms, in no particular order:
The pitch: StartEngine is among the largest and best-known equity crowdfunding platforms. Its profile is definitely raised by its association with Shark Tank’s Kevin O’Leary (aka Mr. Wonderful), strategic advisor, and the very visible face of the platform. StartEngine boasts a huge investor community and goes one step further, offering incentives like the Owner’s Bonus to encourage investments in multiple campaigns. Its size also means that StartEngine offers robust marketing and advertising support, including its own digital ad agency made available to companies on the platform.
One major differentiator for this platform is Start Engine Secondary, an alternative trading system that enables investors to trade startup investments just like they would with shares on the stock market. This option gives investors a lot more flexibility — instead of waiting the typical 5+ years for a liquidity event, they can sell their shares in startups to other investors via this secondary market. It makes StartEngine even more appealing for investors, which makes it more appealing for startups as well. (For more info on StartEngine Secondary, check out our blog post.)
The numbers: $350+ million raised by 500,000+ investors in 500+ completed deals.
The fees: StartEngine charges 7% of total capital raised for Regulation Crowdfunding offerings, an additional 2% of what you raise in equity, and $10K in deferred revenue, collected when the offering is complete. The fee could range from 7%–12% depending on the method of investment and fees associated.
The pitch: WeFunder is a public benefit corporation that promotes the egalitarian nature of crowdfunding with their tagline “We’re here to fix capitalism.” They place great emphasis on the “angel” side of angel investing, promoting the value for investors of helping founders achieve their dreams as well as creating new jobs and invigorating the economy. At the same time, they promote their fundraising muscle, claiming to be “the largest funding portal by dollars raised, number of companies funded, number of investors, and most follow-on financing by venture capitalists” (that would be $5 billion).
WeFunder has been involved in equity crowdfunding from the very beginning, actually helping to get the laws passed that legalized equity crowdfunding in 2012. They claim to be very selective in the companies they choose for their platform, which helps their numbers and also helps investors have confidence in the companies listed on the platform. WeFunder stresses that their team’s background is in tech, not banking or finance.
The numbers: $292+ million raised by 900,000+ investors in 1,524 completed deals.
The fees: For Reg CF, Wefunder charges 7.5% of the total fundraise, only if successful. They don’t charge any additional fees and will match any pricing that’s better. For Reg A+, they charge a flat fee of $375K, which would equal 7.5% of a $5M raise.
The pitch: Like WeFunder, Republic describes its purpose as democratizing fundraising, billing itself as an investing platform enabling regular people, “not just a few wealthy accredited investors,” to own a stake in startups. While many equity CF platforms require a $100 or $250 minimum investment, Republic allows investors to put in as little as $10 or as much as $100,000 per investment. The team’s background is in angel investing (Republic was founded by alumni from AngelList), venture capital, and entrepreneurship.
The numbers: $200+ million raised by 700,000+ investors in 250+ completed deals.
The fees: Republic charges fees only if the company successfully reaches its funding goal. The fee is 6% of the total funds raised in cash, and 2% as a Crowd Safe.
The pitch: SeedInvest describes itself as highly selective, accepting less than 2% of the companies that apply. SeedInvest is particularly insistent that companies use an appropriate and fair valuation, rejecting many applicants for assigning a valuation so high that investors are unlikely to make their money back. While the 2% acceptance rate might seem like a downside for startups, bear in mind that it would surely give investors the confidence that the platform carefully curates the startups it features. SeedInvest claims that it has the highest average capital raised per CF campaign ($435,780, as compared to $313,647 for WeFunder).
While many equity CF platforms have a minimum investment of $100 or $250 (and Republic goes as low as $10), SeedInvest’s minimum is $500.
The numbers: $300+ million raised by 500,000+ investors in 235+ completed deals.
The fees: SeedInvest charges fees only if the company successfully reaches its funding goal. For Regulation D and Regulation CF offerings, SeedInvest charges a 7.5% placement fee and 5% equity fee based on the total amount raised.
Before you make a decision about which equity crowdfunding platform to choose, have some key conversations. Connect with other entrepreneurs about their experiences on various platforms. Ask whether they got the support they needed, in terms of compliance, filing, and marketing. And talk to representatives from the platforms themselves. Listen to your gut when it comes to evaluating these platforms. If what they’re promising seems too good to be true, it probably is. If they’re honest about the risks and firm about compliance with regulations, that’s a very good sign. Now go forth and raise!
Need help with your equity crowdfunding raise? Book a time to talk with me from my calendar — https://www.woodshed.agency/consultation