Any company that has thought about raising money knows about websites such as Kickstarter and Indiegogo, which fund company startups through online donations by regular citizens. This crowdfunding practice is popular among small companies and online sensations. It works because the person(s) raising money offers a small incentive for donation. In The Oatmeal’s campaign, for example, everyone who donated was sent a copy of their game before it was officially released on the market. For others, the gift is a t-shirt or some other type of trinket. However, many companies are, instead of going to open crowdfunding websites, getting involved in equity crowdfunding. There are many benefits involved in equity crowdfunding that are not present in a regular crowdfunding campaign.
The founder of Spacefy, for example, wanted to raise a large amount of money for his company that would have been very difficult through regular crowdfunding. So, he tried equity crowdfunding for his company and ended up raising more money than he had initially needed. Spacefy decided to try equity crowdfunding before Title III was passed, meaning that it was not a more popular means of fundraising. However, they took the chance because they wanted the extra money and publicity that could come from equity crowdfunding.
They are, of course, not the only company to choose equity crowdfunding over regular crowdfunding. Many investors are excited by the chance of being able to gain equity in a company when investing. This would mean, if the company did well, the return on their investment would grow, rather than remain stagnant in something like a t-shirt.
I believe equity crowdfunding is the next big stage of crowdfunding, poised to become even bigger than regular crowdfunding. With companies backed by regular civilians on Kickstarter doing so well, more and more people who gave money wish they got a return on the company’s success. Of course, there are risks that everyone putting money in equity crowdfunding needs to take into account. Like any investment, those that invest need to make sure they truly understand and believe in the company that they give their money to. Take into account that many startups are not successful, and therefore there is a high chance of losing money, or not gaining a return on investment at all.
However, there will be a few companies that succeed. There will be more companies such as Oculus that become worth billions of dollars. Those companies will create a large return on investment, and equity crowdfunding will make sure investors get rewarded for their efforts.