Equity crowdfunding and the importance of managing your investor community

Equity crowdfunding has revolutionized the way companies can raise capital, by providing a platform for individuals to invest in their favourite businesses.

According to Fortune Business Insights, the global crowdfunding market is projected to grow from $1.41 billion in 2023 to $3.62 billion by 2030 (CAGR 14.5%) but while it presents a significant opportunity for companies, it also poses a challenge in managing their investor community effectively.

That community is vital to any equity crowdfunding campaign, as investors’ capital fund the company’s growth and reach its goals. Without investors, private companies would struggle to raise the capital to develop new products or services, expand into new markets, or pursue other growth opportunities.

Therefore, private companies must reach out to their investors by communicating regularly and providing updates on the progress of their business. This helps to create a sense of trust and transparency, essential to maintaining a healthy relationship and sense of community.

Equity crowdfunding is subject to various regulations aimed at protecting investors from fraudulent activities and ensuring that they receive accurate and complete information about the investment opportunity.

In the US, for example, this includes a strict set of rules and disclosure requirements to protect against ‘bad actors’ where a crowdfunding platform may seek to defraud investors or ‘hype’ investment opportunities. Such bad actors may misrepresent the company's financial performance or management team to attract investment, leaving investors with little or no recourse if the investment fails to deliver.

This is why a company seeking equity crowdfunding must hire a registered broker dealer such as Rialto Markets, to reassure would-be investors in that company by scanning for bad actors and conducting due diligence reviews.

The review process involves the company's financials, management team, business strategy, and other factors that may impact the success of the offering. Rialto Markets also verifies the identity of investors and screens them against various regulatory and criminal databases, to ensure that they are not bad actors or prohibited from investing.

By conducting due diligence and screening investors, Rialto Markets aims to provide a safe and transparent environment for fund-raising companies and their investors alike