Wrapping Your Head around Equity Crowdfunding

The full version of this article was first published at: Wrapping Your Head around Equity Crowdfunding

By: Bianca Buliga, Content Curator You may have recently read “How to Crowdsurf, I mean CrowdFUND Wisely”, a blog post that summarizes the four major types of crowdfunding. For a quick recap, crowdfunding can be simply defined as the collective effort of individuals who network and pool their resources, usually via the Internet, to support efforts initiated by other people or organizations. However, this often transcends financial reassurance and involves mobilizing a crowd of people that believe in a cause enough to assemble, creating a momentum of change-making. The four primary forms of crowdfunding are: equity, lending, reward, and donation, but for the purposes of this article we are going to strictly focus on equity-based crowdfunding.     What is Equity Crowdfunding?   Otherwise known as ‘crowdinvesting’, equity-based crowdfunding enables investors to fund promising startup companies and small businesses in return for equity, or partial ownership of shares. As the startup evolves and becomes more successful, each investor’s piece of the pie increases in value. This contrasts greatly from other categories of crowdfunding, since founders do not relinquish a percentage of ownership in exchange for cash. Are there different types of equity crowdfunding?   Equity crowdfunding evolved over three phases in accordance with the federal government’s passage of the Jumpstart Our Business Startups (JOBS) Act, which encouraged funding small businesses by easing various securities regulations. Equity I Enacted in April of 2012, the initial variation of equity crowdfunding allowed accredited investors to view private investment opportunities only on password-protected websites.…
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