Equity crowdfunding is certainly an attractive capital raising option for businesses, like craft beer breweries, that have a passionate “crowd” following them. Indeed, ParrotDog’s campaign appears to have been a great success, being the largest funded campaign on the PlegeMe crowdfunding platform to date.
But, as with obtaining any type of investment funds, there are things to consider before jumping on the crowdfunding bandwagon. You’ve got to have an idea or business that is likely to grab the attention (and financial support) of the crowd. So if your business/idea is in the very early stages of development, crowdfunding may not be suitable.
Also, bringing numerous individual shareholders into the mix may affect future capital raising plans - angel or venture capital investors may look unfavourably on companies with large numbers of minority shareholders with whom their interests may not align.
So, while crowdfunding can be a successful capital raising option, it’s a decision not to be made lightly.
ParrotDog's campaign, which began Wednesday afternoon, crashed the website and raised $1.2m from 420 backers in the first 12 hours, setting a record for the crowdfunding platform.