Equity crowdfunding

Equity crowdfunding is the online offering of private company securities to a group of people for investment and therefore it is a part of the capital markets. Because equitycrowdfunding involves investment into a commercial enterprise, it is often subject to securities and financial regulation. Equity crowdfunding is also referred to as crowdinvesting, investment crowdfunding, or crowd equity.

Equity crowdfunding is a mechanism that enables broad groups of investors to fund startup companies and small businesses in return for equity. Investors give money to a business and receive ownership of a small piece of that business. If the business succeeds, then its value goes up, as well as the value of a share in that business—the converse is also true. Coverage of equity crowdfunding indicates that its potential is greatest with startup businesses that are seeking smaller investments to achieve establishment, while follow-on funding (required for subsequent growth) may come from other sources. Theoretical studies suggest that equity crowdfunding may be particularly useful for startups whose product or service is not yet "market-tested", so that the crowdfunding campaign itself can signal demand for the new product or service.