Equity crowdfunding is a method of raising capital offered to startups and early-stage companies. Basically, equity crowdfunding offers investors the company’s securities in exchange for funding. Each investor is entitled to an ownership stake in proportion to their investment.
A model is an alternative form of fundraising that allows companies to fund in more conventional ways than rewards or donations, such as commercial loans or venture capital investments while providing liquidity at exit (exit means a product development decision has been made). Equity crowdfunding differs from other forms such as rewards and donation-based funding in that it focuses on the financial aspects rather than the entertainment value. Raising money for a startup? Click here to know more.
Equity crowdfunding sites gives you an alternative to conventional capital raising for early stage companies. The basic idea is that it appeals to a broad group of investors instead of a small group of professional investors. The platforms on this list provide risk-averse investors with access to equity offerings that can dramatically increase in value over time – especially if the fundraising eventually leads to an initial public offering (IPO). And they provide important support to entrepreneurs at a time when banks, private equity firms and even some venture capitalists are hesitant or unwilling to get involved.
Although there are a number of equity crowdfunding sites, some are better than others. It’s more of a short-form policy. Crowdfunding examples to start with.
The 10 best equity crowdfunding sites
AngelList is one of the most well-known equity crowdfunding platforms. Founded in 2010, its original purpose was to broker connections between cash-strapped tech entrepreneurs and angel investors – wealthy, tech-savvy backers who made their fortunes selling successful startups. AngelList has remained true to its roots to this day, although there are three main avenues for investment on this platform: Deal by Deals Investments, AngelList Access Funds, and Professional Investors.
Deal by Deals Investements – Registered investors join with investor syndicates led by notable principal investors, typically venture capitalists with extensive experience in Silicon Valley. Syndicates typically exist to invest in specific companies; they have dozens or hundreds of similar contributions from individual shareholders that help write low six-figure investment checks ($200,000-$350K). The minimum investment by an individual is $1k.
The AngelList Access Fund provides access to dozens or hundreds of individual deals. All are vetted by AngelList, so the investor has less due diligence to do – although you should vet all the businesses yourself. The minimum investment amount is $50,000, therefore, it’s not suitable for every potential investor.
AngelList investor includes both high net worth individuals and institutions with $500,000 or more in assets who can invest. The second type is for accredited investors who have portfolios of only $200,000 to $250,000 and invest at least as much as they are allowed to contribute annually to their retirement accounts. Finally, there is the job board, which connects job seekers with early-stage companies looking for talent.
CrowdCube is a platform that focuses on equity-based crowdfunding for businesses and startups. It allows investors to invest in shares of the company and purchase fractional shares through this service. The website also has other lists of potential investment opportunities such as fintech, internet, etc. that you should check out before investing your money. CrowdCube by itself also offers tax breaks.
Fundable offers rewards-based crowdfunding, similar to Kickstarter or GoFundMe, as well as equity crowdfunding. For companies interested in equity crowdfunding, Fundable offers hands-on help with creating an on-site profile and developing a business plan. Fundable now operates under the auspices of TheStartups.co (a portfolio company), which includes Zirtual and other startups such as software developers for the virtual assistant platform Zirtual. Fundable specializes in software and hardware startups like these.
CircleUp is an equity crowdfunding platform for private companies selling consumer products. The company screens potential offerings on its website, which allows U.S.-based companies, but also allows foreign investors. These types of investors must have a minimum annual revenue to be listed on the site. CircleUp requires tangible products or services, meaning those that are already operating businesses that can list on the network.
StartEngine offers a wide variety of investment opportunities in both consumer and enterprise-focused startups Potential industries like robotics, space exploration, and renewable energy are heavily represented here, but more prosaic niches like craft beverages and home automation are not entirely absent.
Many of StartEngine’s offerings have very low minimum investments – in some cases, under $250. In 2020, StartEngine was listed on the Inc 5000 list as one of the fastest growing companies in California! That’s no small feat for investors or founders looking for an equity partner to do business with for years to come.
Wefunder is a crowdfunding platform that allows you to invest in early stage companies and startups. While most competitors require investors to invest at least $1,000 per company or fund, the minimum investment amount for Wefunder’s offerings can be as low as $100 – although many offerings require at least $500 or even more than a thousand dollars. Offerings on the site range from funds that invest in 10 to 15 early-stage companies to individual biotech and green energy startups.
Wefunder’s comprehensive listings include detailed revenue metrics (often with user-friendly graphs and charts), summarized business plans, and interviews with the leadership teams of each company listed on their website. There are also sections titled “Why We Like This Company” written by the company’s employees, offering a wealth of personal insight into the merits of each startup featured on the site. Learn more.
SeedInvest is a platform for vetted investments. It accepts only 1% of companies and offers investors access to detailed information about each company, as well as direct contact with founders or executives. Most of the companies listed are individual tech startups, but there are also some options from other sectors and some funds with multiple companies available on SeedInvest.
There is an escrow system where users invest in their own account when buying shares through the platform – although certain funding transactions can take place outside the platform (at the discretion of individual participating companies). An offer reserved for accredited users only (known as Reg D offers) can be invested at $500 per person if non-accredited individuals wish to provide this small amount for seed investing.
MicroVentures is a full-service investment bank with a robust equity crowdfunding arm that caters to both non-accredited and accredited investors. There are offerings in a variety of industries, focusing on consumer-facing opportunities (e.g., beverage and sports equipment startups) and opportunities in high-growth niches like cannabis or biotech.
The minimum investment amount may be $100 for non-accredited investors, but some offerings have a higher minimum investment amount. Certain investments are only available to accredited investors, usually with much higher minimums.
EquityNet is a platform for investing in companies, usually consumer or social impact companies. However, there are also opportunities for individual investments such as nursing homes and medical clinics. Transactions take place outside the platform and investors must register to view the company’s full financials.
PeerRealty also specializes in commercial real estate and lists companies that finance residential properties like apartments and condos. With individual development projects listed on peerrealty.com, this is a great option for any real estate investor trying to round out their portfolio with a few new investments. PeerRealty also allows registered investors to sell units to each other.
We hope these equity crowdfunding sites will help you with your goals. Click here to learn more about equity crowdfunding.