Equity Crowdfunding Blog

Author Archives: Judd Hollas

Term Sheet Guide: Important Terms, Clauses, and Closing Deals

entrepreneur reviewing term sheet with counsel

A term sheet can be used in a number of transactions, such as the acquisition of a company or a partnership agreement, to establish the terms of a deal between two or more parties. 

In the context of this article, we are going to focus on the term sheets commonly exchanged between investors and entrepreneurs in a Series A or equivalent funding round

We attempt to simplify and clarify the actual terms that are common in a standard term sheet and some cautionary clauses to be aware of before agreeing to the terms.

How to Become an Accredited Investor

investor determining her accredited status by the SEC

We’ve all heard the phrase, it takes money to make money, but to rephrase it in terms that accredited investors would understand, we must make an appendage: it takes money to make money in unregistered offerings. 

This is because accredited investors have access to investment offerings and opportunities that most people do not, even those who earn above-average incomes and have respectable net worths. 

In this article, we discuss who is eligible to invest in unregistered securities and how the Securities and Exchange Commission (SEC) has moved the bar over the years for becoming an accredited investor.

What is an Angel Investor? Definition and Overview

Angel Investors

Angel investing is a unique investment option where high net-worth individuals provide businesses with necessary funding in exchange for equity in the business. People seek out angel investment opportunities because of the higher-than-average potential returns.

Angel investors invest in both mature companies and start-ups alike. A recent study shows that the average business that seeks out angel investors is 6 years old. Companies seek out angels because it allows them to connect with public investors while remaining a privately-held company.

Pre-Money vs. Post-Money Valuations: How to Calculate Each

business woman calculating pre and post money valuations for startup business

There is a surprisingly large number of business finance terms that are prepended with the “pre-” flag: “pre-seed”, “pre-IPO”, “pre-revenue” and, you guessed it, “pre-money valuation.” Perhaps this is because evaluating early-stage business finance is preposterously difficult. 

A company’s valuation can be a controversial talking point in the annals of VC boardrooms and the source of much back-and-forth during term sheet negotiations. This pain point has even led early-stage investors to adopt convertible notes as a way to pass the hypothetical valuation torch on to future investors. 

Common Stock vs. Preferred Stock: Understand The Differences

All corporations, whether public or private, have shares of stock. Each share carries a price, whether established by the market (investors) or approximated by the company itself (pre-money valuation), that when combined, represent 100% of the company’s equity. 

When one buys a share of stock, they are buying a sliver of equity ownership in the company. The type of stock they purchase will dictate if and when they have rights to distributions of money and votes on corporate actions.

In this article, we cover what each form of ownership is (common stock vs. preferred stock) and how they differ for private and public companies. 

How to Find Private Investors For Small Business

two business partners reviewing how to find private investors

Even if you’ve never started a company before, you’re likely aware of how expensive business ventures can be. 

You hear about companies X, Y, and Z raising round after round of financing without even a semblance of profit. Who’s willing to fund these startups and small businesses to the tune of tens or even hundreds of millions of dollars without the certainty of return? 

Knowing how to find private investors for business is essential and something serial entrepreneurs innately understand. But if this is your first time considering a fundraising strategy, you’ll want to understand why private investors exist, what the various types are, and how you can find and connect with them. 

11 Business Pitch Tips from Fundraising Experts

business pitch being delivered to a group of venture capitalists

This article was originally published on March 26, 2021. It was last updated for accuracy and relevance on June 6, 2022.

There are many reasons to pitch your business — investment, sales, customer acquisition, recruiting, and more. In this article, we will focus on strategies to pitch when raising early-stage angel or venture capital.

We cover some of the high-level considerations and tips for pitching investors, an outline for early-stage pitch decks, and advice gathered from watching and reading the pitches and pitch decks of the most well-funded and successful startups. 

Surprising States with the Most Venture Funding Post-Pandemic

Rural states saw massive jumps in venture capital investment from 2020 to 2022

When the Covid-19 Pandemic came to America in March 2020, analysts had dire predictions for the investing landscape. Massive economic recession was predicted, and with it layoffs, startup bankruptcies, and an overall reduction in venture capital investment. 

Instead, in just two years venture investments are larger than ever, and funding is flowing to states that haven’t traditionally been seen as startup hubs. Using data and analysis conducted by Pitchbook, let’s look at what states stand out as funding winners – and losers – in 2022. 

Crowdfunding Statistics for 2021

Since 2005, EquityNet has garnered five patents and grown into the leading business funding platform, with more than 200,000 users and $600 million in funding to date. Since 2007, we’ve been internally tracking crowdfunding statistics data that gives unique perspectives into the crowdfunding ecosystem and business funding environment more generally.

From financial metrics such as average funding goals, pre-money valuations, and revenues, to market insights like growth rates and company sizes, we have made these insights freely available. Visit the Crowdfunding Statistics page for interactive charts and even more insights.

Crowdfunding Raises on the Rise

In 2021, the average crowdfunding goal was more than $2.5 million.

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