CROWD-SOURCED EQUITY FUNDING THE GUIDE

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1 CROWD-SOURCED EQUITY FUNDING THE GUIDE

2 WHO WE ARE crowdfunding.com.au is Australia's largest crowdfunding platform that's radically shifting the way enterprises raise capital. It's where everyday people can easily invest in the boldest business concepts on their way up.

3 WHAT IS CROWDFUNDING Put simply, crowdfunding is the process of raising money from a large number of people to fund a project or idea. There are four main models of crowdfunding.

4 D O N AT I O N - B A S E D C R O W D F U N D I N G D E B T - B A S E D C R O W D F U N D I N G R E W A R D - B A S E D C R O W D F U N D I N G E Q U I T Y - B A S E D C R O W D F U N D I N G

5 DONATION-BASED CROWDFUNDING 1 A contributor makes a payment (or donation ) to the project without receiving anything in return. REWARD-BASED CROWDFUNDING 2 A promoter provides a reward to contributors in return for their payment. Rewards can be goods or services or rights in the company. DEBT-BASED CROWDFUNDING 3 A contributor lends money to the promoter (or pool of promoters), and in return, they agree to pay interest and repay principal on the loan. EQUITY-BASED CROWDFUNDING 4 A contributor makes a payment in return for a share or equity interest in the enterprise. This is the model crowdfunding.com.au operates under.

6 EQUITY CROWDFUNDING IS HERE! After a very long wait, the Crowd-sourced Funding Act 2017 is finally here. The rest of the world has been able to play in this space for years, and Australian investors can finally participate in equity crowdfunding too. The new legislation provides a regulatory framework for Crowd-sourced Equity Funding (CSEF) and enables a large number of individuals to make small financial investments in exchange for an equity stake in an enterprise. Under this legislation, unlisted public companies can raise up to $5 million from investors each year.

7 Equity crowdfunding platforms help enterprises raise funds for their organisation by finding investors who share their vision. Unlike traditional capital raising (where enterprises must knock on doors endlessly), web-based crowdfunding means they can approach thousands of potential investors instantly. These innovative enterprises can now bypass venture capitalists and angel investors entirely and pitch their opportunity straight to the crowd who can provide the capital they need. Traditionally, a tight-knit group of high net worth individuals held the keys to the investment arena. Angel investors and capitalists were the gatekeepers, and they were notoriously particular with whom they let in. Far too many ideas and opportunities were simply tossed aside as they didn't conform to the VC model appetite. Crowdfunding has unlocked the gate and put funding for innovation in the hands of the crowd.

8 ADVANTAGES OF CROWDFUNDING Faster access to funding Until now, getting funding from venture capitalists, banks and accredited investors took time a lot of time. Months and even years is the standard timeframe for access to these kinds of investments, if you are even lucky enough to get approval in the first place. With equity crowdfunding platforms, your idea is live for up to 60 days and if the desired funds are raised, you receive them within 30 days. Brand exposure An active crowdfunding campaign is an excellent way to introduce your overall mission and vision to the market. It means that your venture can receive thousands of organic visits from unique users and potential investors. Crowdfunding also unlocks opportunities for startups to create new relationships with their investors, who can help with marketing exposure through their own social networks. Historically, entrepreneurs had to approach investors, marketers and evangelists separately with very limited overlap. Through equity crowdfunding, this process has become one and the same. Investors become supporters, evangelists and potentially customers, so enterprises can now focus on executing and delivering the best service or product possible.

9 Early movers advantage Enterprises can test the waters, and see if their idea is likely to be well received, before spending huge amounts of money ramping up production or development. The crowd will ultimately invest in products or ideas they see succeeding in the market. If people don t invest, it could be an indicator that people also won t buy your product or service.

10 Non-traditional investors Traditional, sophisticated investors are very demanding and while crowdfunding investors are a more relaxed group of average Australians, you still need to be aware of how to best pitch your business. You may need to get more familiar with consumer marketing or social media and appeal to them in a more creative way. CHALLENGES The crowd doesn t share your vision If the target amount isn t raised within 60 days, all of the funds are returned to the investors. We aim to combat this challenge by promoting our clients via our extensive social media presence. With over 800,000 Facebook followers, we anticipate that the likelihood of this will be slim. Mass exposure With such a large audience to promote ideas to, there is the risk of your competitors getting insight into your business movements. It s always a good idea too to secure the rights to any intellectual property.

11 WHO SHOULD CONSIDER CROWDFUNDING In order to be considered, you need to meet the following criteria: If you are either a startup or an existing business expanding your operation, crowdfunding is a great way to boost cash flow and capital. Crowdfunding is great for niche ideas that may otherwise struggle to receive funding. The exposure that the crowdfunding.com.au platform offers is like no other, with a huge emphasis put on social media to entice potential investors. Moreover, it gives exposure to a likeminded community that can help increase exposure even further. o Be an unlisted public company. o Have less than $25m in revenue per annum. o You are not using the funds to invest in another company or to loan to someone else. o Primary place of business is in Australia. o Have less than $25m in assets.

12 WHY PEOPLE LOVE INVESTING THIS WAY Access to investment opportunities With new regulation in place, Australians over the age of 18 have the chance to invest in the next big idea from as little as $100 through crowdfunding.com.au

13 Community participation For many people, investing in a crowdfunding platform is a naturally social activity. They also develop consumption value from the feeling of being part of the entrepreneurial initiative and surrounded by a select group of early adopters. A lot of people are motivated to invest in a startup for the recognition in the form of a share certificate they can display proudly. Supporting a product, service or idea Philanthropy plays an unusually significant role in crowdfunding motivation. Some users support projects, even for-profit projects, without expecting to receive any tangible reward because they just want to help.

14 HOW TO CREATE A SUCCESSFUL CAMPAIGN In order to create a successful crowdfunding campaign, here s some things to consider: Prepare Marketing is an inherent part of success, and having as many marketing ideas prepared before you launch a campaign is essential.

15 Build a network Build your network in the real world and on social media. If your enterprise is not already active on social media, you should immediately get started on building a presence and acquiring new followers in the social media channels that you consider relevant to your business. Develop your story and vision Write out your story in an intriguing way that manages to capture the interest of its reader. Every organisation should have their vision, mission and values written out as it will help convey the right story and what the enterprise's long-term goal is. Make a video Video content has become king. Statistically, viewers retain 90% of a message when they watch a video, as opposed to 10% when they read the message in text. Campaigns with videos are twice as likely to succeed and are more shareable on social channels.

16 READY, SET LAUNCH! After reading this guide, you should have a clear idea on whether crowdfunding is a viable option for your enterprise. It provides a great alternative to traditional fundraising and can not only give you access to required capital, but also expose you to a likeminded community that may be able to reach an even greater audience. Let s make great ideas happen. Get in touch and experience the power of the crowd. info@crowdfunding.com.au

17 This guide provides general information only. You should seek professional legal and accounting advice before engaging in crowdfunding as an investor or startup.