What is equity crowdfunding?

In a previous article we discussed some of the different ways you can raise investment for your business and one of these methods is equity crowdfunding. You have probably seen the more common form of crowdfunding where a business sets up a campaign and offers people products or gifts in return for money. Equity crowdfunding works in a similar way but instead of offering gifts the crowd can invest in equity shares instead.

If your business decides to go down the equity crowdfunding route you need to be aware that tens or even hundreds of people will own very small portions of equity shares in your business. The total sum of equity owned by the crowd may only be 10% but that is a lot of people hoping your business does well, and if it fails they are likely to lose some if not all of their investment. A potential downside is that having so many shareholders may deter larger investors, such as venture capitalists, from investing at a later stage.