Just as entrepreneurship is a risky undertaking, returns aren’t 100 percent guaranteed for those making financial commitments on equity crowdfunding platforms, says Murat.
“The business may fail in one shape or form, or one way or another, and you will lose your money,” she says. “That is something, as an investor, you have to be OK with, because investing is inherently risky, even at that low $250 entry level.”
In CurlMix’s case, though, a portion of its WeFunder investors are also its customers, meaning they are part of the brand’s success outside of the equity crowdfunding space. Tim says he considers being “community-owned” as a positive thing.
“Typically, those returns that VCs would get are now available to people who look like us, who may not be millionaires or billionaires, so it’s a really revolutionary thing,” he explains. “We just fell right behind that because that’s exactly what we’ve been doing this whole time – pushing boundaries, trying new things, and making sure that we’re taking care of our community along the way.”
Above all, equity crowdfunding has created more options for entrepreneurs to get their product, service, or goods out into the world, many of whom would’ve had a tougher time doing so through traditional funding, says Murat. Black and Latinx founders accounted for only 2.6 percent of venture funding, raising $2.3 billion in the first eight months of 2020, according to a Crunchbase report.
In the equity crowdfunding space, founders of color are accessing capital, despite the recent origin of the platforms. Since 2017, Black and Latinx founders have raised $23.6 million on Republic, according to managing director Janine Yorio. This includes Backstage Capital, a Black-owned firm that invests in startup founders who identify as LGBTQ, a woman, and/or a person of color, which raised the maximum of $5 million in 10 hours.
And with more industries tapping into this new way to raise capital, it has also created options for aspiring investors, to get in on the ground floor of brands they believe in and, hopefully, turn a profit.
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