The evolution of business practices has allowed more investors and businesses to do more of what they love. One of the growing trends in the market today is equity crowdfunding. Several businesses have prospered thanks to funds raised from various investors willing to put their money in businesses that echo their interests.
What is Equity Crowdfunding?
Equity crowdfunding is a method by which businesses raise capital from the crowd through the sale of securities in the form of shares and revenues in a private company not listed on stock exchanges.
This type of crowdfunding usually gets capital from the online crowd. It is the same concept as Indiegogo or Kickstarter campaigns where potential investors can access through a funding website and check out a host of crowdfunding investments. Whilst this has certain restrictions such as the age of 18 years old and above and limit on the investment capital depending on income and net worth.
The difference of Kickstarter campaigns with equity crowdfunding is with the former, investors will participate in the development of the product and they would only get a discount or first dibs on the product once developed. Once the investors receive the product, the contract is automatically terminated. With equity crowdfunding, entrepreneurs or companies sell securities where investors can have a micro share in the company and its assets.
Equity Crowdfunding and Sustainable Businesses
One of the good things about equity crowdfunding is its ability to fuel more sustainable and equitable businesses. The growing trend of investors using their money to make the world a happy and productive place is gaining ground. This gives small businesses the funding they need.
Some of the equitable and sustainable businesses raised through equity crowdfunding include:
Naturalbox is a delivery service for organic snacks, beauty, and health products that benefitted from this type of crowdfunding. Alicja Domelid who runs the company said the initial motivation to start the business was to maintain control over the company’s culture. Naturalbox successfully raised more than €212,160 on FundedByMe, a Swedish equity crowdfunding platform.
Electric vehicles have a number of advantages such as lower maintenance costs. They are much healthier for the environment making it a worthy investment to make. EkoRent is a small company that provides shared and hourly electric vehicles for hire. The company received hefty funding from Invesdor, a Finnish-based equity crowdfunding platform. Raising €171,000 through the platform, EkoRent head Juha Suojanen claims that equity crowdfunding became their choice to raise capital. They felt the general public will show interest in their mission and they were proved right. The platform even became an avenue to promote their business.
Most investors who put their money in this type of crowdfunding because they believe and trust the product and/or services. Investors help fuel these small businesses because it echoes their advocacies. Aside from the monetary investments, these investors are also more enthusiastic in promoting the business. This is because it is something close to their heart, which further promotes more sustainable and equitable businesses.