What if you could invest a few hundred dollars into an organization with a mission to improve the lives of thousands, or even millions of people? What if you could see exactly where your money was spent, and the impact it had?
No, this isn’t one of those pleas for funds to support children in poor villages. But the positive impact you make could be the same – or even greater.
I’m talking about equity crowdfunding.
What’s that? Glad you asked.
You’re probably familiar with rewards-based crowdfunding, made popular by Kickstarter and Indiegogo. The idea with rewards is that you give a company a little money, and later on they send you a gift – usually their own product or some other combination of perks.
Equity crowdfunding is conceptually similar, except your perks are a few shares in the business. Yes – you actually get to own a small piece of a promising company, and you don’t have to be wealthy or play the stock market to do it.
Women certainly know the power of collective investing. In 1962 (before women were legally allowed to hold mortgages), the ladies of the University Women’s Club of Vancouver pooled their resources to purchase Vancouver’s Hycroft Mansion in cash. Today the mansion is a key venue for the Club’s advocacy programs, special events, and education on women’s issues affecting not just Vancouver, but the globe.
This is the principle of equity crowdfunding – if we all own a small piece of something greater, we can truly change the world.
Equity crowdfunding invites women to do the things we do so well – build relationships, support each other and make important financial decisions. It’s an arena for business investing that makes investing in companies inclusive, meaningful and accessible.
Knowledge Matters
It’s not enough for equity crowdfunding to simply exist – women also need to know how to decide which companies to invest in. Jennifer Ladouceur, Founder of Pozentivity Inc., says new women investors face an education barrier if finance is not their profession. Women need more forums where they can ask questions, learn to interpret financial forecasts, and assess risk. Organizations like Keiretsu Forum and SheEO can help provide these forums. Ladouceur also notes that it’s okay to trust your gut; as long as you do appropriate due diligence, your intuition can have the final say about which companies you invest in.
Jake Hessel-Gren, Leap Advisory Services, photo credit: artofheadshots.com
But now that investing is becoming more inclusive and women make up to 80% of important financial decisions for their families, why are women still so reluctant to invest in companies? Jake Hassel-Gren, founder of Leap Advisory Services, says that women are predisposed to the idea that finance-related activities are not their role – especially not outside of the home. Technically, nothing prevents women from investing in start-up companies, becoming accredited investors, or purchasing stocks. But women often don’t participate because the finance world is still dominated by men and male constructs, and women still aren’t comfortable asking questions in that realm.
But as more female entrepreneurs turn to crowdfunding to support ventures that matter and make a difference in the world – while also being more profitable on average than male-owned companies – not only can women access funding options that weren’t available before, but more women get to be part of the journey when they become investors.
You can participate in equity crowdfunding with just a few hundred dollars. The small companies involved are accessible and approachable. It’s great practice if you’re a new investor, and it’s a low-risk way to get started.
But wait – can you actually make money this way?
It’s absolutely possible. This type of investment has only been available to the general public for a few months in Canada and the United States, so very few (if any) companies have paid out any financial returns. But there have been successful examples in other countries where equity crowdfunding has been around much longer.
For example, UK craft brewery BrewDog raised over £25 million through equity crowdfunding, allowing them to scale up in a massive way and bring their product to the United States where they have launched another equity crowdfunding campaign. Those who invested early enjoyed a 443% return on their initial investment a few years later.
Those with a traditional investment perspective just don’t see the point in investing $500 or $1000 into a company, especially with low confidence in the potential returns. And as Hassel-Gren notes, in order to make equity crowdfunding really work for women on both sides of the equation, “women have to convert the success of their business faster. If women use crowdfunding [only] as a relationship-building exercise, no one’s getting any money.” There’s a balance to be struck between the community aspect of equity crowdfunding and the need to build a business that generates returns for everyone – and yes, it’s very possible to do both at the same time.
As equity crowdfunding success stories like Peekaboo Beans now turn towards public offering, we’re seeing examples of exactly how powerful the collective market of women investors and entrepreneurs can be.
Think You’re Ready to Invest?
As women, we like to be prepared. And from Amazon shopping to Kickstarter campaigns, we tend to be more comfortable with online transactions that involve physical things, because we know exactly what to expect.
Equity crowdfunding asks you to be prepared in a different way. Prepared to help an amazing company succeed. Prepared to gain a small financial return, even if it’s month or years away. But also, prepared to lose that investment and still be comfortable knowing that with your support, a great business was able to try something new – even if they didn’t make it. You’re still an important piece of the journey that will no doubt help that entrepreneur succeed in a different way, in the future.
A rising tide lifts all boats – it’s time to get yours in the water.
Want to continue the funding conversation? Join Jessica over in her Renegade Planners Facebook Community. It’s a place to talk business plan, money, and entrepreneurship openly while getting access to some of the BEST free business advice online. Check it out here!”
