Top 5 Benefits of Equity Crowdfunding

Equity crowdfunding is a mechanism that enables groups of investors to fund startup companies and small businesses in return for equity .This form of investment is now a larger source of capital for startups than traditional venture capital companies. Furthermore, the market has been doubling year on year.

Here are 5 key benefits of equity crowdfunding for startups and investors.

1. Access to capital. Prior to the JOBS Act, startups were prohibited from discussing capital investment with potential investors. This forced entrepreneurs to be limited to personal networks to raise finance. The JOBS Act allows entrepreneurs to raise funding, via online equity crowdfunding platforms, from accredited investors.
2. Costs . Crowdfunding has a lower barrier of entry for startups compared to traditional funding routes. Many crowdfunding platforms charge nothing to start your campaign, and if you raise funds through the platform you only pay a small fee.
3. It’s not just about the money. Investors can drive long-term engagement, loyalty, and advocacy. Entrepreneurs can now utilise the power of the crowd for feedback, comments and ideas, which are especially important during the startup stage. As AngelList founder Naval Ravikant says, ‘angels and VCs bring expertise, but the crowd brings customers and fans.’
4. Spreading the risk. Equity crowdfunding investors are a large pool of investors investing at lower levels, lowering the overall risk.
5. Democratizing and decentralizing. Over the last 30 years asset prices have grown much higher than wages for the majority of people. Giving people an opportunity to invest in the future Google, Amazons etc would open up the private equity market to millions more people.

Conclusion

Equity crowdfunding democratises and decentralises private investment by offering lower barriers to entry for start ups and greater liquidity and asset choices for investors. It is already a major source of alternative investment for startups and entrepreneurs around the world, It will continue to grow and offer an increasing share of new business funding in the future.

About the Author: Elliot La Cour is a co-founder of Crowd-Up, a startup that plans to change the way equity crowdfunding works by utilising the power of blockchain technology.

Top 5 Benefits of Equity Crowdfunding was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.