Category: Code For Quity

What is code for equity and why is it better than traditional funding methods?

Start ups are everywhere. They have become an important part of the business world. Many students of today want to one day run a business of their own. You will find many start ups being “incubated,” taken in, by incubators that help them learn and grow. They say that running a business is not easy. Starting one isn’t so even more.

Code for Equity is an uncommon method of business financing that is starting to become a more mainstream option.

How does it work — exactly?

With Code for Equity, you compensate for the funding you receive with shares from your company. The percentage that you give away depends on your company valuation, product development stage, and a host of other factors.

Code for Equity Versus Traditional Funding.

To generate funds for both a new business and one that’s already been running, business owners have previously relied on self-funding or friends and family. There are angel investors out there who have helped launched many businesses. As for venture capitalism, firms—sometimes individuals, it can be safely assumed that you need a lot of will power to work that out for yourself.

Why C4E is Better?

The capital cost of starting a business is quite high. It might get worse as time goes by and if you are not able to meet the expectations of investors. Also, there is a high amount of risk associated with a new venture. Should your idea not satisfy your traditional investor or appear altogether too risky, they might not invest with you at all. This changes with C4E, a way to help prove your business’ worth before giving away a huge chunk, in return for funding. Through C4E, you can take a concept to prototype, MVP or even paying customers, before taking on funding.

Having made an MVP, you can reduce the percentage of your shares being taken away. As you have a physical working product, you can better de-risk the investment into your venture.

With an improved MVP in play, you can have your prototype further perfected for your investors to put even more faith in you and have it market-validated, thereby reducing the percentage of shares they ask of you even more. Market-validation would mean that your product has the potential to bring in the needed, if not desired, return on your collective investment—hence the reduction in the percentage of shares.

Takeaway

Seemingly uneasy, code for Equity can help you get to the stage in the funding process where you have an MVP, a minimum viable product. It also brings market validation for your venture without your having to give up as much of your company initially so you can get higher chances of funding and raise bigger rounds of funding down the road, reducing the number of shares you were giving up at the start.

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