How to Raise From the Crowd
Equity crowdfunding allows eligible companies to raise capital online from customers, supporters, friends, family members, accredited investors, and everyday investors.
Instead of relying only on banks, venture capital firms, or a small number of wealthy investors, founders can invite a broader community to invest in their company.
Under Regulation Crowdfunding, eligible companies may raise up to $5 million in a 12-month period. The offering must be conducted through a registered broker-dealer or funding portal.
But raising from the crowd involves more than publishing an offering page and waiting for investments.
A successful campaign requires preparation, accurate disclosures, professional support, a compelling story, and a realistic plan for reaching potential investors.
Is Equity Crowdfunding Right for Your Company?
Equity crowdfunding can work for startups, growing companies, consumer brands, local businesses, technology companies, and more established businesses seeking expansion capital.
Companies are generally better positioned when they have some combination of:
- A product or service people can understand
- Existing customers, users, or supporters
- Evidence of demand or meaningful progress
- A credible founding team
- A clear use for the capital
- A story people will want to share
- A community the founders can reach
- Enough time and resources to lead the campaign
You do not necessarily need a massive following or millions of dollars in revenue. However, you should have a realistic idea of who your first investors may be.
Most successful campaigns begin with people who already know the founders, company, product, or mission. The wider public may help expand the raise, but founders should not assume that strangers will fund the entire offering.
1. Define the Raise
Begin by determining how much capital you need and what that capital will allow the company to accomplish.
The money might be used to:
- Manufacture a product
- Build inventory
- Hire employees
- Open a new location
- Improve technology
- Expand into a new market
- Invest in customer acquisition
- Support general business growth
Your plan should be specific enough for potential investors to understand what their money could help the company achieve.
You will also need to consider the security being offered, the fundraising minimum, the maximum amount you are willing to accept, and the economic terms of the investment.
These decisions should be made with the registered intermediary and appropriate professional advisers.
2. Evaluate Your Crowd
The strength of a crowdfunding campaign often depends on the strength of the company’s existing community.
Your potential crowd may include:
- Customers
- Friends and family
- Employees
- Existing investors
- Professional contacts
- Vendors and business partners
- Email subscribers
- Social-media followers
- Local community members
- People who support your industry or mission
Follower count alone is not enough. A smaller group of engaged customers may be more valuable than a large audience that rarely responds.
Before launching, founders should estimate how many people they can reach directly, how engaged those people are, and how much of the minimum raise may realistically come from the company’s existing network.
3. Test the Waters
Testing the waters, commonly called TTW, allows a company to measure potential investor interest before committing to a live Regulation Crowdfunding offering.
People can express nonbinding interest, but they are not making an investment, reserving securities, or committing to participate.
No investment money is accepted during this stage.
Testing the waters can help founders:
- Measure early demand
- Identify common questions
- Improve their messaging
- Build a list of interested people
- Estimate how much the existing community may invest
- Decide whether moving forward is worth the cost
Testing the waters does not guarantee a successful raise. People who express interest may ultimately decide not to invest.
However, it can provide useful information before the company begins the more expensive legal, accounting, filing, and campaign-production process.
4. Prepare the Company
Before going live, the company must be ready for legal, financial, and compliance review.
Founders should make sure their corporate records are accurate and organized. This may include reviewing the company’s ownership, capitalization table, formation documents, prior investments, outstanding debt, material contracts, and intellectual-property ownership.
Problems such as undocumented equity promises, missing agreements, inconsistent ownership records, or intellectual property held personally by a founder can delay the offering.
The company will also need financial statements. Depending on the amount being raised and the company’s prior crowdfunding history, those financial statements may need to be certified, reviewed, or audited.
Engaging an accountant early can help prevent delays, particularly when the company’s books need to be cleaned up or reconstructed.
Founders should expect legal and accounting preparation to be part of the cost of raising capital.
5. Prepare the Offering
Before the live offering begins, the company must prepare and file a Form C with the Securities and Exchange Commission.
The Form C provides information about matters such as:
- The company and its management
- The securities being offered
- The fundraising target and maximum
- The intended use of proceeds
- The company’s financial condition
- Existing ownership and debt
- Related-party transactions
- Material risks
The Form C is a public filing and should be accurate, complete, and consistent with the company’s campaign materials.
The company will also need to build a campaign that explains the opportunity in clear, understandable language.
Campaign materials may include a video, founder story, product images, team information, company traction, use of proceeds, offering terms, and frequently asked questions.
Campaign content should be compelling, but it must also be balanced and supportable. Founders should never promise returns, guarantee success, or suggest that an investment is safe.
6. Go Live and Market the Raise
A Regulation Crowdfunding offering must be conducted through a registered broker-dealer or funding portal. EquityCF is not itself a funding portal or broker-dealer.
The registered intermediary hosts the official offering, provides required disclosures and investor education, processes investment commitments, and performs applicable regulatory functions.
Once the offering is live, the founders must actively market it.
That may include:
- Personal outreach
- Customer emails
- Social-media content
- Founder videos
- Online presentations
- Community events
- Press outreach
- Partnerships
- Paid advertising
- Regular campaign updates
The platform provides the infrastructure for the offering, but founders should expect to generate a meaningful portion of the investor demand themselves.
Going live is the beginning of the active fundraising campaign, not the end of the work.
7. Reach the Minimum
Most crowdfunding offerings establish a minimum amount that must be raised before the company can receive any proceeds.
Investor money is generally transmitted to and held by a qualified third party while the offering remains open. The company cannot freely use the money while it is still working toward its minimum.
If the company does not reach the minimum by the deadline, the offering is generally canceled and investor funds are returned.
This makes setting a realistic minimum extremely important.
The minimum should be high enough to provide meaningful net capital after expenses, but achievable based on the company’s audience, expected investment sizes, and campaign strategy.
8. Close the Raise
Once the minimum is reached and the other closing requirements are satisfied, the offering may close and eligible net proceeds may be released to the company.
Some offerings may permit a rolling close.
A rolling close allows the company to complete an initial closing after reaching its minimum while continuing to raise toward a higher maximum amount.
This can give the company earlier access to capital, but rolling closes are not automatic. They must be permitted by the offering terms, the registered intermediary, and applicable rules.
Understand the Costs
Founders should expect both upfront expenses and fees based on the amount successfully raised.
Potential costs may include:
- Testing-the-waters platform fees
- Registered-intermediary onboarding
- Form C and filing preparation
- Securities counsel
- Accounting review or audit
- Campaign video and creative work
- Marketing and advertising
- Payment processing
- Escrow or transaction expenses
- Success fees
- Ongoing reporting
A success fee is usually calculated as a percentage of the capital raised.
The amount displayed on the campaign page is therefore not necessarily the amount the company ultimately receives. Founders should build their plans around expected net proceeds after fees and expenses.
EquityCF will provide founders with a clearer estimate of expected costs before they commit to moving forward.
What Happens After the Raise?
Closing the offering creates a new group of stakeholders and ongoing responsibilities.
The company may need to manage:
- Required annual reports
- Investor communications
- Tax documents
- Capitalization records
- Voting or consent matters
- Payments or distributions
- Future financing activity
Founders should think of investors as long-term stakeholders rather than names on a spreadsheet.
Consistent, honest communication can help maintain investor trust even when the company’s progress takes longer than expected.
Start With a Conversation
You do not need to have every document completed before speaking with EquityCF.
A short conversation can help determine whether crowdfunding may be a good fit, whether you should begin by testing the waters, what preparation may be required, and what costs you should expect.
Schedule a Free 30-Minute Call
Ready to Raise?
Apply when you are ready to tell us about your company, your fundraising goals, your existing community, and how you plan to use the capital.
Submitting an application does not obligate you to launch an offering and does not guarantee acceptance.