5 key benefits of equity crowdfunding
Updated: Oct 7
Although only legislated in Australia in 2018, equity crowdfunding has quickly become quite the hype for small Australian businesses (SMEs). There are alternate viable methods SMEs can pursue to raise capital, however, many founders are beginning to appreciate the multi-benefits of partaking in an equity crowdfunding campaign.
In this article, OnMarket highlights the 5 key benefits of an equity crowdfunding campaign.
Key Benefit #1: Brand Awareness
While you're raising awareness of your crowdfunding campaign, you're also raising awareness of your business. For your campaign to succeed, people need to know you're crowdfunding, so engaging the market is key.
How do you reach people?
Digital marketing, both paid and organic, plays a big part. Your strategy should aim to reach people who relate to your business.
Who should you target?
Crowdfunding has opened up start-up investing. You no longer need to be a sophisticated or experienced investor. Everyday people can now invest in businesses they believe in.
That means your marketing doesn't need to speak only to high-net-worth investors like venture capital firms or angel investors. Instead, you can market to your target audience and customer profile.
What's the result?
You reach people who relate to the problem and solution you're presenting. One initiative raises awareness of both your brand and your campaign.
Key Benefit #2: Brand Ambassadors
People who invest in your business usually do so for one or both of these reasons:
The business interests and values align with their personal interests and values
The investor sees immense potential for business growth and scalability
Either way, they become ambassadors for your brand.
Why do investors champion your brand?
Their success is tied to yours. The more your business grows, the greater their capital gains or community impact. After the raise, you and your investors share one main goal: the growth and success of the business.
What does that mean for you?
As well as funding, you gain a group of supporters who will tell others about your product. Word of mouth is one of the most effective forms of marketing, and brand advocacy is hard to come by. Equity crowdfunding gives you both.
Key Benefit #3: Customer Acquisition
The first two benefits work together. Your campaign increases brand awareness, and those who invest become your brand advocates. Together, they help grow your customer base and sales.
Here’s how the cycle can build:
Step | What happens | Why it helps |
1. Brand awareness | You market your raise to people who relate to your business | They learn about your brand, not just your campaign |
2. Brand ambassadors | Some of those people invest | They now want your business to succeed, so they tell others about it |
3. Customer acquisition | Your investors and their networks buy your product | You can gain new customers through the community built around your raise |
How does this lower your acquisition costs?
By marketing to people who relate to your business, you invite them on board as shareholders and as customers, because your product solves a problem they have.
In one campaign, you increase brand awareness, gain brand advocates and reduce your customer acquisition costs. It's an accelerated marketing funnel that helps move your business forward.
Key Benefit #4: Uncovering your value proposition
Equity crowdfunding has many benefits, but it does take a lot of work. To market your campaign effectively, you need to clearly explain the problem your business solves, your solution, the market opportunity and your potential to scale and grow.
What do you need to nail?
Your elevator pitch. Your audience needs to understand why your business is a good investment and why it's relevant to the market now.
What do you get out of it?
You'll need to dig into the finer details of your business. It takes effort, but you come away with a thorough understanding of your industry, your business and the community you'll directly impact.
Why does it matter?
This knowledge pinpoints your point of difference and what sets you apart from other key players in your industry. Don't underestimate the value of knowing your company story and being able to tell it in a way anyone can understand.
Key Benefit #5: Growth Capital!
At the end of a successful raise, you'll have built your brand through your campaign marketing. You'll also have secured capital from investors to put towards growing the business, such as:
Marketing Campaigns | Product development |
IT and systems | Hiring new staff |
Whatever your business needs to grow and scale, you'll have the capital behind you to do it.
There you have it, the five key benefits of Equity Crowdfunding for small Australian businesses. But don’t take our word for it, take a look at what companies have to say about their journey with equity crowdfunding!
