Equity crowdfunding is a way to raise funds for start-ups or new companies. Investors get shares in the company in exchange for their contributions. The percentage varies in each company, but it can be good option to raise capital rapidly.
Equity crowdfunding is also called investment crowdfunding or crowd-investing.
Benefits of Equity Crowdfunding for businesses
The main benefits include:
● easier access to capital
● management is less stressful
● exposure to social media and PR
● feedback on your idea
Risks in Equity crowdfunding
Main risks include:
● Higher failure probability
● Lack of liquidity
● Dilution of equity
● Possibility of fraud
Process of Equity Crowdfunding?
Below is the process of equity crowdfunding:
● A company approaches a crowdfunding platform
● Platform approves business
● Crowdfunds to the company
● The platform deducts their fees and transfers funds to the business
● Crowd gets a proportionate share in the company