What is Equity Crowdfunding? Did you know you can invest on an equity crowdfunding portal?
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.
Equity crowdfunding is the online offering of private company securities to a group of people for investment. Because equity crowdfunding involves investment into a commercial enterprise, it is often subject to securities and financial regulation. Equity crowdfunding is also referred to as crowdinvesting, investment crowdfunding, or crowd equity.
Investment crowdfunding can be debt-based or equity-based, or can follow other models, including profit-sharing and hybrid models. The term equity crowdfunding is often used to describe crowd investing into both debt and equity based instruments when they are offered on an equity crowdfunding platform.
Selling investments via crowdfunding has been called crowdfund investing, hyperfunding, crowdinvesting, or even simply crowdfunding, as in “legalize crowdfunding”. Some have called for standardization of the terminology in a way that distinguishes the practice from other forms of crowdfunding.
Investment crowdfunding can breach various securities laws, because soliciting investments from the general public is often illegal, unless the opportunity has been filed with an appropriate securities regulatory authority, such as the Securities and Exchange Commission in the U.S.
What is Equity Crowdfunding for Startups?
Equity Raisers offers the other 98% of investors that were unable to participate in private companies the ability to now invest. This has opened an entire new industry for startups to list their companies on a Funding Portal and be able to raise funds from friends, family, and other non accredited investors.
What if you were able to invest in companies online before they filed for an IPO?
Crowdfunding is regulated to protect investors.
Creators on crowdfunding platforms are often inexperienced and lack the ability to complete funded projects by agreed deadlines. Additionally, amateur investors are susceptible to fraud when they fail to verify projects and “free-ride” on other investors’ funding histories. Above all, there is an overall risk of failure in early, platform-driven projects.
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