Crowdfunding for business allows non-accredited investors to own shares in small businesses, startups, and entrepreneurial companies. Prior to the Jumpstart Our Business Startups (JOBS) Act, only accredited investors could invest directly into private companies. By the SEC’s definition, accredited investors are individuals with an annual income over $200,000 or a joint married income of over $300,000 for the previous two years. Alternatively, an individual is considered a high-net worth individual if they have a net worth exceeding $1 million USD.

Equity Crowdfunding and Access to Capital

By lowering barriers to small investment in private companies, proponents of crowdfunding for business feel that more businesses will be able to raise capital. Prior to the JOBS act, who funds small business?

Typically, angel investors, venture capital firms, or private equity firms will pool the capital from accredited investors to invest in startups. However, their business model looks for rapidly scalable firms such as tech startups, distressed firms as is the case in private equity, or other niche investment opportunities. Legal and regulatory costs can also lead to disinvestment in other local investment opportunities such as real estate.

Proponents of equity crowdfunding believe that the efficiencies generated by crowdfunding portals and the lower barriers to investors will lead to more small businesses seeking equity investment. These new investment opportunities might be in real estate, regional or local businesses, retail, as well as traditionally scalable technology firms.

How Can I Invest in Crowdfunding for Business?

Visit a registered equity crowdfunding portal to view investment opportunities. There are a number of different portals including Wefunder, StartEngine, Fundrise, and Seedrs for those in the United Kingdom. Registered portals act as a broker-dealer and provide rigorous due diligence for campaigns that are listed on their site.

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