Just over six months ago, we launched equity crowdfunding on Indiegogo. Through our joint venture with MicroVentures, First Democracy VC, anyone can invest in startups and innovative companies for potential financial returns.
Since November 2016, we’ve launched 14 offerings, raising nearly $5M from more than 3,700 investors worldwide. All 11 of our completed deals reached their minimum goals, and we’re constantly adding new offerings ranging from tech companies to distilleries to films and more.
So, what exactly IS equity crowdfunding? This fairly new industry is growing quickly following the passing of Title III of the JOBS Act in May 2016. Whether you’re interested in investing in companies you care about or opening up your early-stage startup to investment crowdfunding, here’s what you need to know.
What is Equity Crowdfunding?
Equity crowdfunding, also commonly referred to as investment crowdfunding or crowdinvesting, is a concept that arose in 2009. Equity-based crowdfunding allows people to invest in an early-stage, private company (a company that is not listed on any stock exchange) in exchange for equity (shares, or a percentage of ownership) in that company.
This is different from rewards-based crowdfunding, where people can contribute money to campaigns in exchange for perks.
Title III and the JOBS Act
In April 2012, President Barack Obama signed the Jumpstart Our Business Startups Act, or JOBS Act. One of the goals of this act was to give more people to ability to participate in investment opportunities. Title III, passed on May 16, 2016, was a landmark piece of legislation for the investment crowdfunding space.
Title III gives every American the opportunity to invest money into the startup companies they care about, while enabling issuers to raise up to $1 million over a 12-month period online.
Who Can Invest in Equity Offerings?
Since the passing of Title III, any American 18 years or older is eligible to invest in an equity offering. International investors can invest as long as they follow their countries’ securities regulations, so we recommend checking local securities laws before investing.
What are the Benefits of Investing in Equity Offerings?
As with any investment, there are always risks. There is always the possibility of losing all or a portion of your investment. However, the unique nature of investment crowdfunding offers many benefits that investors won’t find anywhere else.
Because most offering companies are early-stage startups, you get a chance to be a part of the journey, with the potential to participate in the company’s upside. You’re showing your support early on, which gives you the chance to feel more engaged and as though you are actually a part of the business. Plus, you can diversify your portfolio, while supporting new ideas as they come to life.
If you have ever wanted to be a part of a company’s journey to success, equity crowdfunding could be for you. Investing in an innovative startup gives anyone the opportunity to own a piece of the company and be along for the ride, whether up or down. It’s also a great option for early-stage companies to bring together their communities and engage with their biggest supporters from the beginning.
Ready to learn more about equity crowdfunding? Join Indiegogo co-founder Slava Rubin and Techstars founder David Cohen for an AMA on Thursday, July 13, 2017 at 9am PT/10am MT. Register here!
This blog post was originally published on Indiegogo.