Equity crowdfunding is when you raise money from the sale of securities through the crowd. This type of funding can be powerful, but it can also introduce a large number of people into your cap table (investors).

Benefits:
– Larger pool of investors.
– Larger potential raise size.
– Public exposure.

Downsides:
– Potential for public failure of the campaign.
– More investors in your cap table.
– Regulatory management and investor updates.
– Dilution of equity stake.

If you are taking this approach, it is important to make sure the platform you use follows proper SEC guidelines and regulations.

How Equity Crowdfunding Works:

1. A business that wants to raise capital registers on a platform and creates a profile with a funding target and set or variable securities offering with a minimum investment amount. There are different requirements if you want the campaign to be open to everyone or if it is just for accredited investors.
2. Investors can then invest capital into the company in exchange for an equity stake in the company.
3. The company uses the capital in hopes of growing and being able to generate a return for shareholders.
4. The company either grows and gives distributions to shareholders, goes public, sells (exits), or closes down.

Recommend Equity Crowdfunding Platforms:

• Start Engine – Over $300 million raised across 500 companies.
• Our Crowd – $1.8 billion committed to 255 portfolio companies.
• Republic – $150 million raised across 250 companies.
• Fundable – $615 million committed on the platform.