Answer to Question #183324 in Marketing for Zargon

Question #183324

Topic : 'How might the employers equally pay employees"

Suppose a Crowd funding Pitch plan is developed to solve this issue such as Equity Crowd funding.

Based on this information: 

Determine your project’s fundraising goal amount, along with what be your ‘tipping point’ and Realistically assess your fundraising potential, whilst identifying your first 5 contributors/backers.

Expert's answer


Crowdfunding helps businesses raise capital in a relatively short amount of time. This is made possible by having a large base of investors remit a sum of money, each. Equity crowdfunding is directed towards rewarding the investors with equity in the company (Asquith & Mullins 2011). Essentially with equity crowdfunding, the investors will hold a stake in the company, as is entailed in the company’s balance sheet. 

Taking into consideration a situation whereby an EV or electric vehicle startup company which I helped found needs capital for the purchase of raw materials, setting up of a larger factory, and payment of staff, I would seek a crowdfunding investment into my company. This would translate to a rough figure aggregating 1,300,000.00 USD, United States Dollar. That would be enough to expand the small assembly line to enable the output of a medium volume of cars. The pre-money valuation for my virtual company currently stands at $4,000,000.00.  

Instantly summoning the capital would be quite a challenge for the company, so we would opt for private equity crowdfunding to raise the amount. This way, the investment will be open to a wide array of investors, ranging from small to large investors. Equity crowdfunding is conducted online, and shares bought online except for large transactions whereby wire transfer would be better suited. With the typical risks involved with securities and equities, the company would in the early stages hire an experienced lawyer. I would then seek for the company to be registered under the Financial Industry Regulatory Authority, FINRA, or Security Investor Protection Corporation, SIPC. 

After the company is legally allowed to raise funds, it would be necessary to assess the equities assigned to each investor. Since investment would be open to both large-scale and small-scale investors, it would be logical that equity is distributed according to the percentage of capital accrued from the percentage allocated to each group of investors. The first group would be the founders, who would be myself and one more person, who would reserve 75% of the company, the management and employees would reserve 5% of the company while the rest of the investors, 20% of the company. This would mean that the dilution will be at 25 percent. It would not be ideal, in my case to lose the founders’ share value; hence contribution would be capped at 1,300,000.00 to maintain the 25% dilution rate. 

It is important to highlight that equity dilution would be inevitable, which is what all company founders who seek for equity crowdfunding experience (Asquith & Mullins 2011). Upon selling equity, the ownership percentage decreases for the founders. Hence to achieve a balance between earnings per share, ownership stake and share value, it would be important to maintain the equities at the mentioned percentages. 




Asquith, P., & Mullins Jr, D. W. (2011). Equity issues and offering dilution. Journal of financial economics15(1-2), 61-89.

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