equity crowdfunding

Intermediate 🚀 Startup / VC

Definition

Raising capital from numerous small investors through online platforms, democratizing access to startup investment and the opportunity to lose money on early-stage companies. Kickstarter, but instead of getting a T-shirt, you get illiquid securities.

Example Usage

They raised $1M through equity crowdfunding on Republic, attracting 500 investors who each put in an average of $2,000.

Origin

Enabled by the JOBS Act of 2012, which loosened restrictions on soliciting investment from non-accredited investors

Fun Fact

Despite enthusiasm about democratizing startup investment, most equity crowdfunding campaigns fail to reach their targets, and successful exits remain extremely rare.

Source: Alternative financing and securities regulation terminology

Related Terms

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