Equity crowdfunding is gaining popularity among startups or small companies looking for an alternative type of financing.
In this post we are going to explain what it consists of and the benefits of equity crowdfunding, in addition to its difference with the already known crowdfunding. So keep reading!
What is equity crowdfunding?
Equity crowdfunding or capital crowdfunding It is a method used by newly created or initial phase companies, which consists of raising capital.
Investors who participate in an equity crowdfunding project are entitled to a stake in the company for the value of the capital contributed.
That is, investors in exchange for small amounts of money receive a part of the capital of the company.
Differences between equity crowdfunding and crowdfunding
equity crowdfunding not like others types of crowdfunding, the money is not lent or donated, the money is invested.
Therefore, your contribution of money is injected into the company's share capital and the investors receive contributions or shares in exchange for their investment.
It is a different method of raising capital for early stage companies.
The main idea of equity crowdfunding is to raise the necessary capital by obtaining small contributions from a large number of investors.
Benefits of equity crowdfunding
benefits can be produced both the startup and the investors.
Among the benefits of equity crowdfunding are:
- Easier access to capital: This crowdfunding method allows entrepreneurs and small businesses to showcase their projects to a larger number of potential investors, compared to conventional ways of raising capital.
- control is divided: by increasing the number of shares, the participation of a large number of investors means that power is not concentrated around a specific group of shareholders. Although, equity crowdfunding does not mean a dilution of power within the company.
- Speed: the equity crowdfunding campaign allows to raise large sums of capital in a short time to carry out a business.
- Possibility of profit: Despite the fact that startups are companies that carry high risk, there is a possibility that the company will grow and provide very positive benefits to its investors.
How to carry out an equity crowdfunding campaign?
The success of an equity crowdfunding campaign It is made up of a startup, investors and an equity crowdfunding web platform that connects the two.
Equity Crowdfunding includes the crowdfunding from accredited investors and open access crowdfunding and not accredited.
- Accredited crowdfunding allows companies to raise funds from high net worth individuals and institutions.
- Open access or non-accredited crowdfunding invites anyone to invest in a company in exchange for a share of the investment.
If you are looking for financing as a start-up company, equity crowdfunding can connect you with a multitude of investors who want to invest.
Alter Finance helps you find the financing you are looking for for your company. Learn more about the Crowdfunding We will wait for you!.