by: Grow VC Group
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All too many companies assume that once they start raising online, they do not have to do anything but wait for investors flock to them.

Wrong.

The assumption that “if you post, they will come” is the single biggest mistake we see companies making when setting out to raise online. Why is this assumption wrong?

Consider the two main branches of equity crowdfunding. The first branch includes platforms that are basically online billboards. They give the company’s raise much wider visibility online that the company would probably attain on its own. They showcase company profiles to the right audience – investors. They also typically have investor lists the company can use to send their materials to accredited investors and funds. They help companies screen if the prospective investors are accredited. For letting a company rent space on the platform and peruse the platform’s investor lists and capabilities, these platforms typically charge the company an up-front, flat monthly subscription fee.

The real work to send material to investors, schedule investor meetings, and overall pound the pavement and market the raise falls on the company.

This has a simple reason. The platform typically earns a few hundred dollars a month at most on the company’s subscription: this simply is not enough for the platform to be able to dedicate hours upon hours of work on any one company, let alone get out and knock on investor doors on the company’s behalf. Often owners seek to get around this incentives problem by offering to compensate the platform for funds raised. But for regulatory reasons, platforms in this branch cannot really market any one company’s raise nor charge commissions, and thus they rely on the monthly subscription for revenue.

Read the whole article on TradeUp Blog.

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Grow VC Group The Grow VC Group is the world leading, global pioneer of securities crowd funding, peer to peer marketplaces, new investment models and global business development. Established in 2009, the Group has developed new investment models on six continents and continues to innovate the global market.

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This entry was posted on Saturday, September 26th, 2015 at 4:00 pm and is filed under Business Education. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.