With recent changes opening equity crowdfunding up to more startups, there’s been a bit of buzz about it lately.
For example, you might have heard about movie ticket startup Choovie’s recent success raising almost $300,000 on Equitise. We were proud to have supported Choovie in this campaign, helping the team prepare financial records and projections beforehand.
And it made us want to share the love to help more startups understand equity crowdfunding so you can consider it as part of the funding mix. So here goes …
What is equity crowdfunding?
It’s crowdfunding, but not as you might know it.
By contrast, equity crowdfunding asks people to invest small amounts in your company in exchange for equity in it – for as little as $250 in some cases.
Who can use equity crowdfunding?
Crowd sourced equity funding in Australia has recently been opened up after the government passed legislation making it possible for proprietary companies (i.e. with Pty Ltd in their name) to use it.
This is great news because previously you had to convert to an unlisted public company to access equity crowd funding for startups, which meant extra upfront effort and ongoing red tape.
Now you don’t have to, and you can read more about how this opened up equity financing for startups here.
But there are still some regulations you need to be aware of, including:
- Your company needs to have an annual turnover or gross assets of no more than $25 million
- Your company can raise a maximum of $5 million via equity crowdfunding per year
- Preparation of an annual report and Directors report in line with Australian Accounting Standards; and
- If you raise $3 million or more, you will also be subject to auditing requirements.
All of which makes having a startup accountant on call very useful, if we do say so ourselves 🙂 This is where our capital raising support services can come in very handy, like they did for Choovie recently.
What are some equity crowdfunding websites for startups?
What other types of startup funding are there?
Heaps! Well, quite a lot anyway, including other types of crowdfunding.
To understand the overall crowdfunding landscape, read this blog on what sites offer the best crowdfunding for startups and when to consider using it. Because it’s not for every startup.
And as for other sources of funding: We’ve explained them all, including where they fit into the funding life cycle, in our free Startup Founder’s Guide to Funding ebook.
It’s especially for early stage startups and if you can’t see a download pop up on this page, just email us and we’ll email it to you.
Otherwise, thank you for reading and go well!