Being able to take part in a growing business that is making an impact on our world is an exciting prospect. By investing and gaining part-ownership, practically everyone can play a role similar to that of a venture capitalist.
What is crowdfunding equity? What distinguishes it from other investment choices?
Equity crowdfunding refers to raising money from small public investors primarily through online forums and social media. In exchange for relatively small amounts of cash, investors get a proportionate slice of equity in a business venture. In the past, business owners raised such funds by borrowing from friends and family. Applying for a bank loan, appealing to angel investors, or by going to private equity or venture capital firm.
Advantages of investing in equity crowdfunding
Potential for outsize returns
Investing through equity crowdfunding holds out the potential for huge returns. Although it must be stressed that the odds of hitting a home run on such investments are quite low.
A greater degree of satisfaction
Investing through equity crowdfunding can give the investor a greater degree of personal satisfaction than investing in a blue-chip or large-cap company. This is because the investor can choose to focus on businesses or ideas that resonate with him or her.
Opportunity to invest like accredited investors
Before the advent of crowdfunding, only accredited investors could participate in early-stage speculative ventures that held the promise of high reward and equally high risk. The minimum amount threshold for such investments was quite high. Equity crowdfunding, however, makes it possible for the average investor to invest a much smaller amount in such ventures. In that sense, it has leveled the playing field between accredited and non-accredited investors.
It is unlikely that this kind of investments are going to be liquid, so it is important to select an Equity Crowdfunding platform that will be there in the long-run. Platforms which have a track record of experience in crowdfunding or capital raisings should be the ones that you can trust with your investment.
Read more: Start Your Investment or You’ll Regret