Building a business requires quick access to capital. And Ken Staut, founder of GrowthFountain, wants to make finding funding even easier.
GrowthFountain is a platform dedicated to equity crowdfunding. Most startups are familiar with the terms “equity” and “crowdfunding” on separate planes. But now, the two exist in the same stratosphere.
What is equity crowdfunding? It lets individuals like you and me invest in a startup for equity, without being filthy rich or a member of that company.
Up until several months ago, only high-net-worth individuals could invest in startups and take equity. After Congress wrote a rule amending the requirement that investors be accredited, President Barack Obama approved the revisions to the Jumpstart Our Business Startups Act. And since then, GrowthFountain created a platform that allows ordinary people to fund startups with missions they believe in—without companies fearing they’re soliciting donations. It’s about helping a business out, especially as seasoned investors tighten their purse strings.
“The crowd that invests in your company is going to help you refine your product, develop strategy, and advocate on your behalf better than a focus group,” says the WeWork NoMad member.
More good news: “The platform isn’t just tailored to investors. It also holds the keys to powerful resources that save startups a lot of time, energy, and money,” Staut says.
“Small businesses don’t have a level playing field,” Staut says. “We provide them with all the tools and resources they need, including term sheets, financial valuation, legal documents, and creating job offer documents. We also have access to an advisory board.”
What’s the draw of equity crowdfunding? It’s helpful for startups that have a difficult time finding investors that are a great fit. It lets them get access to cash without putting up collateral—a big consideration for many new companies.
For startups on the fence about equity crowdfunding, Staut advises on why it’s worth it.
1. Don’t put all your assets on the line. Traditional loans require collateral, like your home or your car or your great grandfather’s priceless heirlooms. “It’s not the most ideal situation for small businesses that don’t have unencumbered access to material possessions,” says Staut.
2. “Minimize unintentional consequences.” In other words, instead of letting the bank issue an interest coupon along with your debt if your company defaults, be on the offensive and don’t be in bondage.
3. Make family get-togethers less awkward. You can only ask your parents, your best friend Sally, and your Uncle Richie for money for so long before they feel uncomfortable even talking to you for fear of being asked for more.
4. “Turn customers into owners.” There’s a difference between crowdfunding platforms that ask for donations, like Kickstarter and Indiegogo, and equity crowdfunding platforms that give investors a stake in your company. When customers have ownership of a business, there’s vested interest in becoming “brand ambassadors and evangelists,” Staut says.
Photos: Katelyn Perry