Equity crowdfunding is a simple, low cost way for entrepreneurs and companies to raise money from a wide pool of investors to fund their new ventures.
A company post its Project on the crowdfunding website and specifies how much money it is looking to raise and for what percentage of the company. Think of it as an online Dragons Den.
Investors are invited to subscribe for shares in the company and can contribute anything from €10 to €1 million. So, let’s say Acme Enterprises was looking to raise €1m in return for 40% of the equity in their company. If someone invested €500,000 they would get 20% of the company and if someone invested €250,000 they would get 10% of the company. Therefore, if someone invested €25,000 they would get 1% of the company.
Put simply, equity crowdfunding is a way for companies to raise money from a wide range of small to medium sized investors.