Equity crowdfunding is the practice whereby people invest in an early-stage unlisted company in exchange for shares in that company. Shareholders have partial ownership of a company and make profit when the company does well. Unfortunately, the opposite is also true. When a company makes loss, investors can lose all, or some of their investment.
Since equity crowdfunding involves investing in a commercial enterprise, it is subject to financial and security regulations. Equity crowdfunding is also known as investment crowdfunding, crowdequity or crowdinvesting.
Equity crowdfunding does not only help the crowd to drive and fund innovation but also helps entrepreneurs’ businesses to start and grow. Does fintech facilitate or hinder crowdfunding?
In the offline world, it is hard for investors to find and invest in private companies. It takes time and resources to network into a deal and investment minimums are always very high. Fintech exists to make this process easy. With fintech, investors can find opportunities, review company’s information and engage with managing teams. Although fintech platforms allow investors to make their own decisions, they make the process more efficient.
Fintech platforms also allow investors all over the world to invest as little as $10 into a business they believe in. They also enable entrepreneurial businesses to raise funds from family, friends, institutions, angel, and the crowds.
With the help of Fintech, equity crowdfunding platforms give people a chance to buy into the next Snapchat or Uber before it goes public (by the time these big and private ventures go public, value creation has already happened, which was not the case when Google or the Microsoft era companies went public)
Before Fintech set in, equity crowdfunding was for insiders, you never had access to startups. Now, you can invest into a company before it goes public and appear as if you are the clever investor who got in early. Fintech allows investors to invest early in companies that have potential to change the world.
An example of Fintech platform that has improved equity crowdfunding is StartEngine. The StartEngine has revolutionized the startup financing model. It helps people to invest in private firms on public platforms, thus helping entrepreneurs achieve their dreams.
Some Fintech firms have also come up with tools that improve equity crowdfunding. For instance, HelpTheCrowd, an Amsterdam-based Crowdfunding comparison platform launched a new Equity Crowdfunding Analytics tool in April this year. The tool aims to bring transparency to equity crowdfunding market. The tool is very important to equity crowdfunding sector and is helping investors compare investment opportunities from different countries, sectors and platforms.
Founded in 2015, HelpTheCrowd started collecting data in August. With it, investors can now access some data and review top crowdfunding platforms, as well as the individual investment on those platforms.
In conclusion, Fintech has made numerous impacts on equity crowdfunding. If you know of other ways in which Fintech is improving crowdfunding, just contribute by leaving a comment bellow this article.