The Benefits of Equity Crowdfunding

Equity crowdfunding is changing the landscaping of the private securities market as it creates new opportunities for both companies and investors. Accredited investors are already able to take advantage of this innovative method of funding startups and businesses. And equity crowdfunding for non-accredited investors is currently available through an intrastate exemption for residents of Georgia and Kansas while the SEC determines the rules that will govern Title lll crowdfunding per the JOBS Act. How can equity crowdfunding benefit you?

Helping the economy recover
First, equity crowdfunding benefits the economy in general, which was the intent of the JOBS Act passed in April 2012. By allowing easier access to funding for companies, crowdfunding will be an impetus for more job creation and boost the economy of the U.S. Small businesses are an integral part of the American economy, providing jobs for many people and helping stimulate the sluggish economy.

An innovative means of raising capital for businesses Business owners seeking growth capital and hopeful entrepreneurs looking for seed capital alike have found the lending climate to be less than welcoming since the economic recession a few years ago. Banks have tightened up on small business loans and SBA loans have dropped 20% in just the past year. For those who think venture capital is the answer to funding their company, the harsh reality is that 98% of business plans pitched to venture capitalists or accredited angel investors are rejected. Where does that leave someone looking for seed or growth capital?

The answer may lie in equity crowdfunding, poised to become an innovative and effective means of funding businesses that also benefits entrepreneurs, small business owners, and investors. By spreading the risk of a new venture among many investors, crowdfunding promotes new businesses development, which in turn creates more jobs. Crowdfunding utilizes an online process of funding companies, and relies on a larger pool of investors who invest at lower levels to mitigate risk. This increases the investor pool, allowing those who previously were unable to invest in companies and startups access to this type of investment.

Crowdfunding offers more than money
Crowdfunding offers more than just seed capital to a company; by engaging the investors, companies gain visibility, interest and advice from their investors. It’s this power of the “crowd” that is unique to crowdfunding and makes it appealing to entrepreneurs and investors alike. The crowd is a built-in vetting system that can weed out weak investments or actively promote strong ones, thus providing benefits for both companies and entrepreneurs.