The promise of royalties provides a way to draw investors into funding license-based businesses. The risk is no greater than if they were buying stock, but the reward comes with extra benefits and returns that can be reaped much faster than with a traditional investment.
When a small manufacturer gets a major, million-dollar order, but they don’t have the cash on hand to make the goods because their outstanding invoices won’t be paid for 60 days, where do they turn for quick cash?
When an inexperienced restaurant owner hires an under-qualified family member to handle the business’s accounting, and that family member makes a payroll tax error that will cost the business its liquor license unless they pay in full within 30 days, how do they come up with money in a pinch?
Are you familiar with the term “pre-bankable”? Many business fall into this category, meaning that either they haven’t been in business long enough to qualify for traditional bank financing, or they can’t qualify because of bank underwriting requirements. It’s no secret that banks have not been a source for small business lending for some time now, and unfortunately, change isn’t just around the corner for many deserving businesses.
According to the National Venture Capital Association (NVCA), the venture capital (VC) market in America is shrinking, with the number of VC firms significantly decreased in recent years. The NVCA reports that VC investment and under-management are also on the decline.
Plenty of small business owners invest months leading up to the launch of an equity crowdfunding campaign. But the work does not end with a successful raise: Maintaining effective ongoing communication with investors, customers and stakeholders long after the campaign has ended can not only prevent legal headaches, but can also become a competitive advantage.
Want to know whether or not a proposed business investment is sound? Look no further than its Value Proposition. A VP is the starting point for potential issuers in developing equity crowdfunding campaigns that has a significant influence on their success or failure. Simply put, if the VP isn’t clear and compelling enough, investors will look elsewhere for better returns for their dollars.