Equity crowdfunding simply creates more opportunities for entrepreneurs and investors.
Typically, an entrepreneur raised capital through Venture Capitalists (VC’s) or banks.
This was the traditional way. With these options, certain demands are made, benchmarks to reach, expected growth etc. Sometimes, fulfilling on these demands can leave one’s hands tied.
But back in 2016 equity crowdfunding was made legal. It has created opportunities for many who might not have had it. It has opened doors for funding, given more access to entrepreneurs and investors.
With equity crowdfunding, an entrepreneur can pitch their business to anyone.
They can pitch to their friends, users, fans, and anyone in between.
It allows people to agree or not agree with the entrepreneur’s dream. They can choose to invest in the idea/team and see where it goes.
The goal is that everything goes good and the entrepreneur and investors co-reap the rewards.
This is a continuation of the American dream and of course, capitalism.
We let the market decide who is worthy of investment.
Luckily there are regulations in place to protect against fraud. Regulations like the JOBS Act, which requires companies to publicly file their offerings.
It’s made it so companies cannot sell securities to the general public without disclosing certain things about their business. This information is not only crucial to investors making decisions but also creates a barrier for scammers.
With equity crowdfunding, it allows more than just the rich to invest. It helps businesses raise capital and grow their business that otherwise may not be attractive enough for the larger investors.
Just look at Facebook when it first started and Amazon when it first started selling books.
Equity crowdfunding allows anyone to take part in something like this.
When an investor makes the right decision, there is the possibility the entrepreneur can reward these investors many times over.
This is good news for investors, and regulations also allow them more flexibility. The investor is no longer locked into a startup for 5-10 years. They can now trade their investment sooner than ever was possible.
With liquid assets, investors can get out quicker if they choose. Some investors are looking for a quick return rather than playing the long game.
With equity crowdfunding still being fairly new, time will only tell how the market will adopt it.
Will it continue to grow at current rates?
Why not, there is too many opportunities and potential for it not to. It is also more attractive for a potential business to do so.
They don’t have to accept all the VC term, hard money, or banking restrictions. With equity crowdfunding, they can set their own terms and raise as much money as they want.
Will your idea be the next great business?
Let the crowd decide!
Sonia Rina Davies is a passionate entrepreneur, speaker, author, and personal development coach. She is an outspoken advocate of the free market economy and has helped countless clients identify their core values, envision and realize goals that resonate with those values. She oversees several businesses both online and offline.