An equity crowdfunding platform essentially acts as an investment facilitator between the issuer and the end investors. These platforms must be registered with the SEC as either a broker-dealer or as a standalone funding portal.
There are three core elements that any good equity crowdfunding platform should have:
1. Investment Checkout/Payment Process
- One of the core needs of a platform is the ability to actually take payment from the investor and have them provide and/or sign any relevant documents.
- The regulatory requirements surrounding the checkout / payment process can make it somewhat involved and so it is critical that the platform has a well laid out and easy to use investment flow that works great across both mobile and desktop.
2. Investor Login Portal
- Platforms should also provide a login portal where investors can check the status of their investment to ensure their funds have cleared and shares are issued.
- This portal typically serves as an interim resource for the end investor as their shares will eventually be managed by a stock transfer agent.
3. Issuer Portal
- Good platforms will also have an actual portal for the issuers to log into and manage the raise.
- Two key examples of what a really good issuer portal will allow for:
- Reporting – the issuer will be able to see real-time reporting on their raise and see fundamental metrics such as: investments cleared vs pending, investments by media channel, investments by age range and gender, etc
- Sales/IR Team Resources – really good platforms should also contain tools for the sales and Investor Relations teams to work with. One example from a platform we work with; they have an actual CRM in the backend of their system which the Sales/IR teams can work directly out of. They offer functionality such as:
- Automated lead scoring (utilizing data from all raises the platform has conducted)
- Investment flow screen mirroring – allowing a sales/IR team member to walk an investor through the investment steps while seeing the same screen as the investor is. This allows Sales/IR to actually close business over the phone and makes for a much smoother process.
The Current Landscape of Equity Crowdfunding Platforms
The current reality of the equity crowdfunding platform landscape is one that has a lot of room for improvement in the coming years. Most platforms out there today lack key functionality that is necessary for a successful capital raise. Some examples of major issues that we come across all the time when evaluating platforms:
- Reporting – Many platforms available today offer no useful reporting to issuers. To be honest, most platforms simply send the issuer (and their marketing partner) an automated raw Excel data dump every night and leave the issuer to make sense of what’s happening with their raise.
- Issuer Portals – Many platforms don’t even have an issuer portal which leaves the issue in the dark about many aspects of their raise. This creates a massive transparency issue and does provide the issuer or their marketing partner with the tools they need to successfully manage the raise.
If you are an issuer that is considering raising capital using one of these platforms; contact us first and we can guide you through the process to ensure you select the best platform for your raise. We have worked with just about every platform out there and have a fundamental understanding of the features/functionality available on these platforms as well as the often significant cost differences between each platform.
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