Tuesday 13 January 2015

How Much Money Should You Raise through Equity Crowdfunding?

How Much Money Should You Raise through Equity Crowdfunding?



Determinants of an Equity Crowdfunding Goal

Startups should calculate two variables before crowdfunding:
safeguards and milestones. Safeguards refer to financial resources used
to weather unexpected market downturns, upswings or other disruptive
fluctuations. Extending the runway analogy, this includes backup
materials or labour for maintenance and repairs. Milestones are
quantifiable achievements, explicated clearly in the business plan, that progress towards a larger end.


Capital raised through equity crowdfunding should secure several
milestones, with just the right amount of safeguard for protection or
innovation. Typically, 18-months’ worth of capital is sufficient, though
some rounds may strive for 24 or more. Larger amounts allow startups to
focus less on cash flow and more on development and growth.
Alternatively, smaller seed rounds enable entrepreneurs to keep control
of their companies and offer higher returns.

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