Bridging The Equity Gap

Often founders spent more time raising funding than they do on building their business. If they succeed, they have lost valuable time during which they could have grown their company. If they fail to raise investment, the whole company fails. We started Leapfunder with a goal to change that, startups no longer need to waste time because they can’t organise sufficient funding because they don’t have the right solution to bridge the equity gap.

Bridging the equity gap

Bridging The Equity Gap

The hardest period to finance is the so-called ‘equity gap’, the period between the initial injection of founder savings (usually about €50k) and later VC rounds (> €1m). The equity gap is the development phase and an early growth phase of a company. In this phase, the risks and the potential return are high. Founders’ own money has often run out, and venture capitalists are not yet interested. Traditionally this phase is bridged by funding from friends and family and later from angel investors. As multiple investors in multiple rounds are often needed to bridge the equity gap, this often leads to a lot of shareholders making the company less attractive for future financing.

There is an alternative. At Leapfunder, we have a way of making it easy for smaller investors to get together around a promising startup. By working together, smaller investors can help to bridge the equity gap.

What does a company providing an equity bridge need to do deliver? It needs to deliver:

  1. Access to active investors
  2. An efficient way to transact a complex multi-investor transaction (no lawyers)
  3. A bundling mechanism for smaller investors so that they speak as one and the thing doesn’t become a barrier for future professional investors.

We have made such a bridge. Concretely our core product is a hassle-free online tool that any startup can use. All the legal, clearing and settlement of investment take place online in less than 3min. If you have more than 3 investors you need such a standardization, otherwise, negotiations become impossible.

Leapfunder Notes help to bring structure to your financing. Everyone invests under the same conditions. Upon conversion, all investors are bundled in a standard investor pooling structure. Leapfunder Notes are easy and robust for both startup and investor, thus giving the entrepreneur time to do what he does best: build his company!

Find out more about how we can help your startup bridge the equity gap here:

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