Attracting angels and VCs to equity crowdfunding

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Attracting angels and VCs to equity crowdfunding

Equity crowdfunding has been growing exponentially across the world for the past decade, and is on track to overtake venture capital as the largest source of startup funding.

But the new class of investors it brings with it - amateur investors and average citizens - is unlikely to bring the niche, nuanced and hard-won expertise that VCs and AIs provide.

Historically, these 'elite' investor classes have approached crowdfunded startups with trepidation. But the exploding CSF market has become impossible to ignore, and many are realising the credibility, value, and strategic benefit it can bring.

Angels and VCs have different perspectives, priorities, and investing styles, but combined, they can be a powerful force in your equity crowdfunding campaigns.

Angel Investors

As the name suggests, angel investors (AIs) are often benevolent individuals. An AI may be a group (or ‘syndicate’), but they’re more likely to be a wealthy, independently-operating investor who may be well-known or even related to the founder.

Sometimes referred to as ‘seed investors’, they have an interest in the success of businesses or start-ups as well as an almost secondary desire to make profit (almost!). They will usually portion off no more than 10% of their portfolio to riskier investments such as equity crowdfunding campaigns.

Venture Capital

Venture capitalists (VCs) can be more fatalistic. They are always profit-driven, using pooled funds from a group of investors and strategically managing them to generate returns.

Unlike AIs, they have a responsibility to their clients, to ensure they come away with a solid return at the end of the day.

But there’s nothing to say you have to choose. Equity crowd-sourced funding (CSF) is not only a great equaliser in bringing investment opportunity to the average person - it also facilitates the combination of funding sources, and the benefits of each avenue.

The advantages of combining investor types

  • A combination of CSF, VC and AI provides the broad reach of online, democratised crowdfunding, along with the expertise and leadership of experienced investors.
  • Equity crowdfunding gets the numbers up, and allows you to remain at the helm of your ship. If you decide to combine investor types, having more traditional investors on board bodes well for wider confidence.
  • Pursuing equity crowdfunding does not limit you to one funding source. If you can secure preliminary funding this way, it lends credibility and validation in the eyes of higher profile investors like venture capitalists.

For the founder, the ability to draw from multiple channels of funding can never be a bad thing. In an increasingly popular model, VCs and AIs can provide lead investment and the guidance and mentorship that come with it, and CSF can be brought in to generate buzz, democratise the process, and hit that final target.  

Any equity crowdfunder - new or seasoned - can and will benefit from expert guidance on investors, targets and strategy for their campaign.

Speak to the STAX Listings team here - an initial chat is free with no obligation.

James Brannan

Director of Operations at STAX

Sam Henderson

Director of Marketing at STAX

Natalia Forato

Social Media Manager at STAX

All views, investment or financial opinions expressed are those of the author and do not necessarily reflect the official policy or position of STAX. The information contained in this post is not investment advice or a recommendation to buy or sell any specific security.
Understand the Risks

Under crowdfunding legislation in Australia, STAX is what’s known as a ‘gate keeper’. That means we’re obliged to check certain company details on your behalf. Read more about how we select companies here.

Like anything in life though, investing on STAX comes with risks. While we carefully screen every company, we can’t actually guarantee their success. Nor do we give any investment advice or take responsibility for losses. We’ve covered the general risks here.

Information is currency.
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