A Basic Introduction to Equity Crowdfunding

For many entrepreneurs, investing in a startup company is not possible because of their financial situation. Traditional types of investment (from banks, large corporations, through venture capital, etc.) are prohibitive to smaller investors; however, equity crowdfunding allows small-scale investors to grow their companies. Equity crowdfunding became possible after the JOBS Act, specifically Title lll of the Act, was passed in May 2016. This form of crowdfunding is known as Regulation Crowdfunding or “Reg CF”.

More about Equity Crowdfunding

Equity crowdfunding (through Reg CF) benefits investors as it allows an individual to invest and eventually acquire shares in a privately-held company. Any qualifying individual can now become an investor in their company of interest. There are no specific rewards guaranteed to investors using the equity crowdfunding program; however, shareholders will earn profits in the form of dividends and the ability to sell their stake to other investors as the business grows and develops.

To invest in a company, investors must be at least 18 years of age. There are no minimum income requirements. People anywhere in the world can invest─ international investors, however, must meet their own country’s security and investment regulations to be eligible. The investment criteria are quite lax, which makes it possible for anyone to begin to build a diverse and entirely self-directed investment portfolio.

The Benefits

While there are no guarantees with equity crowdfunding investments, there are many benefits to consider; for example, equity crowdfunding has regulations that protect investors and it can be accessed and operated online through an efficient crowdfunding portal. For a comprehensive list of benefits, see our site here.

In addition, each investor can choose to invest at a level that meets their financial situation. Nonetheless, Reg CF has vast potential for small companies, as it allows companies to raise up to one million dollars. It is an attractive and effective solution for private investors with limited finances. Many private companies have used equity crowdfunding as a means to go public.

To learn more about equity crowdfunding and how it can build your investment portfolio, give Colonial Stock Transfer a call at 801-355-5740.

Eric Mellmer
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