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How Equity Crowdfunding Works: The Future of Startup Capital

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How Equity Crowdfunding Works: The Future of Startup Capital

By Startup Valley (319 words)
Posted in Equity Crowdfunding on April 21, 2014

There are (1) comments permalink

It isn't often that the world witnesses a significant shift that changes the way startups receive funds. The concept of equity crowdfunding is fairly simple to understand. Essentially, equity crowdfunding allows any ordinary person to invest in an up-and-coming company in exchange for shared equity.

For a very long time, you could only act as an equity investor if you could prove you were worth at least one million dollars or had an income of at least $200,000 per year over the last two years. In equity Crowdfunding under Title III of the JOBS Act, each and every person can invest in startups according to their own abilities to participate. By vastly expanding fundraising opportunities, equity crowdfunding can energize worthy startups and boost the overall economy.

The SEC is still finalizing the rules for governing the implementation of The JOBS Act. Needless to say, it is never too early for startups to prepare by networking and developing their brands. When full implementation rolls out, it is likely that entrepreneurs with well-developed networks of supporters should begin seeing rewards.

Briefly, here are a few important ways equity crowdfunding will change entrepreneurship in the near future:

  • Increased opportunity for the public by making everyone a potential startup investor
  • Allows entrepreneurs to bypass intermediaries and speak directly to their target demographics
  • Enable companies with facility for online community-building to immediately monetize this skill
  • Companies will save money in promoting their ideas. Rather than pitching to traditional investors, entrepreneurs can market their ideas to a receptive online audience

Startups will take advantage of equity crowdfunding at many stages of their development.

Though new companies do offer value, it can take years before finding receptive audiences for outstanding business models. Listing your business on an equity crowdfunding portal such as StartupValley can allow for increased exposure, awareness and potential business opportunities.

Comments (1)

Jeffrey Allen posted on: April 23, 2014

For the amateurs who think crowdfunding is the "future" or "revolutionary"... it isn't. It merely imitates DPO's which has successfully existed for decades. DPO's do not require investors to be accredited like crowd donations will IF and when the SEC completes it's assessment of rules. One think for sure projections according to businessjournal.com is that 75% of angel investors will likely bow out of crowdfunding because of stipulations that they provide full disclosure.
And finally lets not forget the 6 month average due diligence timeline required by sophisticated investors is unlikely to change.

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