The Basics of Equity Crowdfunding

Equity crowdfunding is the process is which the crowd will invest in a company that is in its early stage in exchange for large shares for that particular company. A shareholder will then have partial ownership of that company and has the potential to profit if the company is doing well. The opposite is also a factor if the company fails, the shareholder could also lose a great deal of money. They could lose their entire investment if the company fails.

Making Up a Crowd

In an equity crowdfunding situation, you may be wonder who it is that makes up the crowd. It used to be that only venture capitalists, or other wealthy business owners would purchase shares in their early ventures. This type of crowdfunding has helped early-stage companies to improve on their investment by opening a door to a bigger pool of investors. This also means that more sophisticated investors will get on board. What is a sophisticated investor?

  • Someone who is in a network or syndicate of a business and has been one for at least ½ a year
  • An individual who has made multiple investments in a company that is unlisted in the last 2 years
  • An individual who has worked or is working as a professional in a private equity sector
  • A person who has been a director of a large company and has made more than $1 million in a fiscal year

You will want to talk to your stock broker or professional to learn more about how crowdfunding equity actually works and how it can benefit you financially.

Colonial Stock Transfer Company, Inc. is a stock transfer agent who can help with equity crowdfunding. You can learn more about equity crowdfunding via their website where you can also get professional advice on taking your first step into crowdfunding.

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