Equity Crowd Funding

Equity crowd funding is the name given to the process whereby people (the “crowd”) invest in an 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. The concept of fundraising has been around for many years. However, it has got a facelift with the digital age. These days, the growing significance of the internet and online interaction in our lives has made things all about crowd funding and it’s not difficult to see why. Crowd funding is more than just something that gives people and entities like small businesses, independent artists, and independent philanthropists a way potentially reach millions of benefactors. It’s also a way to do so for little to no overhead and to build an audience of longtime supporters in the process.

The growing prevalence of crowd funding sites such as IndieGogo and Kickstarter have only helped crowd funding become even more popular. These days, it’s considered trendy and highly beneficial to help an individual or a company raise money for a stellar project that’s important to them. What’s more, benefactors often get to take advantage of truly unique rewards and payoffs for helping a given campaign reach its goals. Supporting crowdfunding campaigns that you believe in is a terrific way to help shape the face of the arts, modern industry, society, and more as well.

The term itself was first used in 2006 by Michael Sullivan as related to fundraising efforts for a video blogging network at the time. Crowdfunding is also considered by experts to have some roots in a concept known as crowdsourcing. Crowdsourcing is actually an offshoot of outsourcing. It involves rationing out duties and responsibilities attached to a project or task to various members of the general public. People who take on such tasks as part of a crowdsourcing effort typically do so on a volunteer basis, but occasionally there may be additional incentives involved.

People active on the internet today are going to be most familiar with reward based crowdfunding, which allows people to collect actual rewards for donating within specific ranges to a given project. Rewards can and do cover just about anything depending on the campaign in question, but they’re almost always related directly to the project or the entity doing the fundraising. For instance, if funds are being raised to help publish a book, donation incentives could include copies of the book, tickets to book signings, or public acknowledgements on the author’s website.

Equity based crowdfunding is a bit different in that the incentives are different. Instead of simply scoring a piece of free merchandise, a one-time experience, or something similar in exchange for their donation, benefactors actually get to share in a piece of the pie as far as the budding start-up goes. The incentive to contribute to the initial funding is actually a small stake in the company itself, making the money given into more of an investment than a true donation. Those most interested in equity based crowdfunding opportunities are going to be those who are interested in truly investing in a valuable idea, project, or start-up business.

By: Parveen bansal