By Krishan Arora – CEO and Founder, The Arora ProjectAug 24, 2020
For decades, businesses in need of capital have turned to venture capitalists (VCs). So when Covid-19 hit and the early stage VC investment landscape dropped by 57%, it looked bleak for startups — until equity crowdfunding took center stage. But what exactly is equity crowdfunding? Read on for everything you need to know about this multi-billion-dollar market and how it’s set to revolutionize the future of fundraising for high-growth ventures around the globe.
What exactly is equity crowdfunding?
Put simply, equity crowdfunding is when businesses turn to everyday people for investments versus approaching VCs. When you launch an equity crowdfunding campaign, anyone with a credit card and as little as $100 can make an investment in your company.
If you haven’t heard of equity crowdfunding before, that’s likely because until new SEC regulations were unveiled in 2017 only accredited investors could be solicited for investments. And since to become an accredited investor you must have an annual income of at least $200,000 or a net worth of $1 million, this severely limited the pool of potential investors.
Today, sweeping regulation changes have led to the rise of equity crowdfunding platforms — most notably Wefunder, StartEngine and SeedInvest — that enable companies to raise money from the public in exchange for offerings, such as promissory notes, convertible notes, SAFE agreements and revenue shares.
In practice, the response from the public has been astounding. The Arora Project is a full-service crowdfunding campaign management agency, and through our crowdfunding campaigns we’ve raised over $75 million; largely from high-growth ventures who were seeking a more innovative and community-focused fundraising avenue.