What is Equity Crowdfunding?

by Sean Ross

0 min read

Equity crowdfunding is the raising of investment capital in small amounts from the public through the use of social media and the internet. In exchange for capital, shares of the early-stage unlisted company are given to each investor. The shares being offered are unregistered and capital can be raised from nonaccredited and/or accredited investors. The securities offered are allowed to be common shares, nonconvertible preferred shares, convertible preferred shares, nonconvertible debt securities, convertible debt securities, limited partnership units, trust units, or flow-through shares.

The process of equity crowdfunding may need to be done during a funding window, which is a time period when the funding campaign can be open and active. This may be required by securities regulation. This method of financing, which is an alternative to venture capital, is a rather new and completely legitimate form of raising money.

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