Equity crowdfunding is a simple, low cost way for entrepreneurs and companies to raise money from a wide pool of investors to fund their new ventures.
A company posts its Project on the crowdfunding website and specifies how much money it is looking to raise and for what percentage of the company. Entrepreneurs should think of their pitch as if they were going onto "Dragons' Den", highlighting the key reasons why someone should invest in their company.
Once the campaign goes live on the Spark Crowdfunding website, investors are invited to subscribe for shares in the company and can invest anything from €100 to €1 million. The higher the investment, the more shares the investor receives.
So, let’s say Acme Enterprises was looking to raise €1m in return for 40% of the equity in their company. If someone invested €500,000 they would get 20% of the company or if someone invested €250,000 they would get 10% of the company. Therefore, if someone invested €25,000 they would get 1% of the company.
Put simply, equity crowdfunding is a way for companies to raise money from a wide range of small to medium sized investors. Campaigns typically run for 30-45 days, depending on how much the company is looking to raise, although campaigns that are close to reaching their target can be extended, at the discretion of the company raising the funds.
The company must achieve its full target before a campaign completes 'successfully', although a higher amount than the initial target can be invested in the company. The company pays no fees unless the campaign is a success. The company pays a fee of 6% on funds raised - the investor pays nothing.
Contact Spark Crowdfunding today if you would like to discuss any aspect of equity crowdfunding in Ireland.