Editor’s Note: This article about the investment options available through Regulation A, was shared with us by Alice P. Neuhauser, CFO at Seismic. Seismic is an early-stage growth investor committed to identifying, guiding, and nurturing companies seeking to meaningfully disrupt the space they work in.
Startups have been able to pursue new routes to raising capital outside the traditional venture capital model with equity crowdfunding, and these Regulation A investments are gaining momentum.
Unlike the typical VC investor, Regulation A investors do not need to be accredited, and minimum investment costs are usually low, which greatly reduces the barrier to entry. Sustainable/ESG (Environmental, Social, and Governance) startups have the most potential to take advantage of these offerings, allowing their vision to become reality with a source of funding that is rooted in support and engagement around shared values. In addition, certain greentech founders will be able to take advantage of three critical aspects from Regulation A investments:
The Right Investors, Who Truly Support Your Mission and Values
Through Regulation A investments, the opportunity for investors to support the startups they admire widens, but consumers can now get a piece of the pie. For mission-driven startups within sustainability, the added pool of investment opportunities from democratized capital allows founders to connect with their customer base who are typically more engaged and aligned with a business’s values than other industries.
The expanded option gives sustainable startups a leg up in identifying the right investors who truly believe in the work they are producing. Early understanding and shared visions create stronger ties between startups and their investors. Passionate investors also offer the benefit of added visibility and reach to wider audiences, as they’re more likely to share their investments and portfolio companies across their social media channels and networking groups.
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A Commitment to Start-Up Friendly Patient Capital
Investments through this avenue are made with a commitment to patience compared to traditional VC investment models. When investors are aligned with your missions and excited for the roadmap to growth and success, patience in the process is established from the beginning. Allowing startups, especially within the sustainability space, to move at a pace that ensures product/ service quality and efficiency is maintained is pivotal.
Rushed capital has proved to put founders in difficult positions to grow or expedite timelines ahead of schedule, and the results can hurt the bottom line. Green small businesses don’t have the luxury to charge forward without taking the precautions that allow them the ability to make the biggest impact on the world around them. Patient capital gives entrepreneurs the opportunity to ensure their path forward creates meaningful change in the communities they serve, the environment, and their people.
More Investment Opportunities with a Collaborative EcoSystem
As sustainable startups review the expanded options for raising capital, Reg A will also offer founders the ability to now take a more critical look at the benefits each investment firm or individual investor will bring to the table. Active investors who participate in strategic decision making and participate in idea exchanges will give the sustainability community the resources needed to continue to expand within their industries.
Gone are the days of startups pining to work with flashy, big-name venture capital firms who invest but are ultimately absent from the decision making process. Entrepreneurs in the green space will have a suite of options to carefully review each interested party, and the investors eager to have a seat at the table will come out on top.
Investors will continue to seek to diversify their portfolios in the new year, and sustainable companies will be a bright spot for them to explore. The year ahead brings opportunities for sustainable startups, and Regulation A investments are one way these businesses can grow and succeed. The right investors, patient capital, and fostering a collaborative ecosystem gives green businesses the tools they need to continue to make a difference in the world around us.
In the cover picture: A working in a startup. Photo Credit: Unsplash.
Editor’s Note: The opinions expressed here by Impakter.com contributors are their own, not those of Impakter.com