Equity Crowdfunding for Startups

Equity crowdfunding is a mechanism that enables broad groups of investors to fund startup companies and small businesses in return for equity. Investors give money to a business and receive ownership of a small piece of that business. Equity Raisers offers equity crowdfunding investments to non-accredited investors using Title III offerings.

FINRA and the SEC will now regulate the amount individuals can invest using Regulation Crowdfunding under Title III of the American JOBS Act. Investors making less than $100,000 per year are able to invest up to $2,000 or 5% of annual income through equity crowdfunding. Investors making over $100,000 per year can invest up to 10% of their annual income, but no more than $100,000 per year.

  • Non-Accredited Investors Crowdfunding

  • Accredited Investors Crowdfunding

Equity crowdfunding is the type of crowdfunding with which Title III of the JOBS Act is primarily concerned. Although Debt Crowdfunding is also covered under Reg CF. With Title III type of investment, multiple investors pool money into a specific startup in exchange for equity shares. Since non-accredited investors are now able to participate using Title III, this effectively levels the playing field between accredited and non-accredited investors.

Equity Crowdfunding! Invest in Early Stage Startup Companies Online!

What is Equity Crowdfunding?

Equity crowdfunding is the process whereby people (i.e. the ‘crowd’) invest in an early-stage unlisted company (a company that is not listed on a stock market) in exchange for shares in that company. A shareholder has partial ownership of a company and stands to profit should the company do well. The opposite is also true, so if the company fails investors can lose some, or all, of their investment.

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Equity Raisers - Equity Crowdfunding Portal for Startup Investors

Equity crowdfunding is the collective effort of individuals to support efforts initiated by other people or organizations through the provision of finance in the form of equity. In the United States, legislation that is mentioned in the 2012 JOBS Act will allow for a wider pool of small investors with fewer restrictions following the implementation of the act.

Unlike non-equity crowdfunding, equity crowdfunding contains heightened “information asymmetries.” The creator must not only produce the product for which they are raising capital but, also, create equity through the construction of a company.

Research suggests that syndicates, which involve many investors following the strategy of a single lead investor, can be effective in reducing information asymmetry and in avoiding the outcome of market failure that is associated with equity crowdfunding.

Under existing regulations, an individual is an accredited investor if he or she is any of the following:

A person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of his or her primary residence;

A person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or

A director, executive officer or general partner of the company selling the securities. In certain circumstances, an entity, like a business or charitable organization, may be an accredited investor, as well, but typically that entity would either need to have $5,000,000 or more in assets or be composed solely of other accredited investors.

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