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Equity Crowdfunding Facts You Need to Know

Equity Crowdfunding Facts You Need to Know

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Equity Crowdfunding Facts You Need to Know

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  1.   Equity Crowdfunding Facts  You Need to Know    While everyone has likely heard of crowdfunding at this point, equity                       crowdfunding differs from more traditional models. So, what is equity                     crowdfunding? And how does it work in comparison to other crowdfunding                       methods?   In this article, we’ll define ​equity crowdfunding and explore some of the                         essential facts you need to know about this innovative way to finance new                           businesses.   

  2.   What is Equity Crowdfunding?  While popular ​crowdfunding platforms like Kickstarter allow the public to                     invest in apps and products, equity crowdfunding allows the crowd to invest in                           companies. Let’s say you’re investing in a crowdfunding campaign for the iPhone                         (before it became the iPhone, of course). Once a campaign has been funded,                           instead   of   receiving   an   iPhone–you’d   share ownership in the iPhone           company–Apple.  Essentially, equity crowdfunding is a type of online offering which allows                       members of the crowd to own a piece–or two–of a startup or private company.                             With any luck, that company will turn out to be as successful as Apple.             Understanding the definition of ​equity crowdfunding​, let’s explore this topic a                                       little deeper.  Here are a few crucial equity crowdfunding facts every investor and entrepreneur                         should know:    Equity crowdfunding is not new  Equity crowdfunding is relatively new to the United States. However, in other                         areas of the world, this model of financing is not new.   In Europe, an Esports job platform was recently reported to have raised 250% of                             its target amount in just under one week through equity crowdfunding.1 The                         company launched its campaign on Crowdcube, which is amongst the most                       popular ​crowdfunding platforms​ in Europe.     

  3.   The equity crowdfunding market is evolving   In other words, this market is not just limited to tech and millennials. In learning                               to understand equity crowdfunding, an important fact to keep in mind: it spans           multiple sectors across the globe. ​Equity crowdfunding campaigns exist in                                     areas of healthcare, real estate, travel and tourism, and beyond.   At the same time, crowdfunding ordinarily is associated with more youthful                       generations of entrepreneurs.A 2019 study determined that recent campaigns                   tend to be launched by older, more established companies who can more easily                           access outside funding.    Young higher-ups = higher chances of success  Although the experienced, veteran companies are getting skin in the equity                       crowdfunding game, age matters when it comes to predicting the success of a                           campaign. Data suggests that companies with younger high-ranking members                   are more likely to launch and complete successful equity crowdfunding                     offerings. If you do your research to evaluate an ​equity crowdfunding investment                         opportunity, do not underestimate the value of a few young members in top                           management.    Regulations help mitigate some potential risk  Equity crowdfunding still requires entrepreneurs to put in all the effort of a                           traditionally-financed company. These businesses are responsible for launching                 their own marketing campaigns to educate the public about their idea and                          

  4.   attempt to obtain financing for it. Launching full-scale marketing and advertising                       campaigns demands hard work.   At the same time, government regulations have been put in place to protect                           investors, particularly those “non-accredited” individuals from the crowd.                 Businesses seeking capital through ​equity crowdfunding have to be extra careful                       about misleading the public or making claims about potential earnings or returns.                         The best startups are willing to put in the extra energy.    Investors still need to do their due diligence  Regulations can protect crowd investors, making it more difficult for them to be                           deceived. While these are in place to protect investors, they do not relieve them                             of responsibilities to execute due diligence. Before investing in an equity                       crowdfunding campaign, be sure to get the facts about the humans behind the                           business plan.     Equity crowdfunding campaigns have high ROI potential  As is often the case, the higher the potential reward, the greater the risk. An                               important fact to know about ​equity crowdfunding is that the potential for return                           is often long-term. If you’re looking for a way to pay next month’s rent, investing                               in an equity crowdfunding campaign will disappoint you.   Understanding the possibility a campaign may fail to acquire the target funding,                         investors should assess personal risk tolerance along with the policies of                       potential investments. Many ​equity crowdfunding campaigns will protect initial                    

  5.   investments, holding them in escrow until the funding goal has been reached.                         Become familiar with these policies before handing over your hard-earned cash.     Equity crowdfunding may have the potential to evoke change  While anyone can start a business, not everyone has access to the money they                             need to launch one successfully. In the past, new companies had to depend on                             financial intermediaries to acquire startup funding.   Today, online ​crowdfunding platforms allow new companies to open up                     financing to the public. This digital form of investing provides large amounts of                           individuals an opportunity to invest in businesses at a much lower price. If                           everyone from the crowd can participate, research suggests ​equity crowdfunding                     could efficiently distribute capital to new companies and improve welfare.  Ready to learn more? Click here to explore the ​benefits of equity  crowdfunding for real estate investors.    Source: ​https://www.hotelierco.com/equity-crowdfunding-facts/    Follow Us:       

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