What is equity crowdfunding?

What is equity crowdfunding? 

Today the methods of financing have changed. Companies no longer have to settle for the loans offered by banks. In other words, alternative financing methods are gaining in importance compared to more traditional methods. Both undertaking and investing are now easier thanks to equity crowdfunding

But what does this term mean? we will explain below what equity crowdfunding is and how you can opt for this simple and honest type of investment. Don’t miss out! 

What is equity crowdfunding? 

Equity crowdfunding was born, or is based, on the concept of crowdfunding, so it is important to know beforehand what the crowdfunding method consists of. The essence of crowdfunding is collective financing, which consists of the contribution of money by different people in order to support a project through a specific platform. This means that the same project can be financed by several people, which makes the investment much easier since it will not be necessary to invest a very large amount of capital. 

The fact of being able to contribute a minimum of money is very profitable for investors because they can have a diversified investment portfolio. In other words, to invest in several projects at the same time. In this way, a greater profitability can be obtained. 

So, what is equity crowdfunding? Since it is an investment, the concept remains the same. However, in this case, a person can invest in an already consolidated company. It is not necessary to be startups or companies that are just beginning, even though they are also part of the plan. In this way, individuals will be able to make profitable investments without the need to be a big investor. The opportunity is brilliant. 

You have to take into account that crowdfunding equity platforms can connect you with companies that are not listed on the stock exchange and that need financing. This is why investors, you in this case, become shareholders with rights to participate in the future profits of the company in question. 

Why is equity crowdfunding interesting? 

Equity crowdfunding is interesting for investors because it does not require too much capital. It is enough if you have some savings that allow you to invest in what you like and are excited about. In addition, if it is possible for you to make a small investment,  you will have the opportunity to increase your profits in rapidly growing startups. In this way, you will be able to gain more quickly. 

Besides, by having so many possibilities, you will be able to invest in several projects that really interest you. Always keep in mind that for an investment to be successful, you have to believe in it. So, invest in those companies that transmit something special to you and that fit your way of seeing life. 

Tips for investors 

We will summarize some tips that you should consider if you are an investor (or if you are about to become one). So, pay attention! 

  1. Read carefully everything explained to you. As it is online, you will normally be given the documents in digital form. These documents are very important since they contain the business plan of the company, the objective and other issues that you will have to know. Once you have read all the information about the company and the project, invest in it. 
  2. Diversify. Diversification is essential in this type of investment. Although the probabilities of profitability are high, they will increase if you decide to invest in several projects. This way, if one project fails, the others do not necessarily follow.You will always have a small guarantee and possibilities of obtaining a good profitability. 
  3. Don’t be afraid to ask. Remember that the money invested is yours. It is essential that you ask all the questions you have and that you solve them before betting on a certain company. 
  4. Ask third parties. If after clearing up all your doubts and reading the documents you still don’t know what to do, ask a third party. You can ask about the process, the company, whatever. The important thing is to collect as much information as possible to invest safely. 

So, if you are an investor, keep in mind these little tips, we are sure that your investments will be much better if you apply them. 

Why choose equity crowdfunding as a financing alternative 

For entrepreneurs, it is an interesting option because it frees them from having to ask for financing through loans, meaning that the interests will be much lower than in any bank. 

For investors, equity crowdfunding is interesting because there is a way to minimize risks by diversifying the portfolio. If you invest in several companies instead of betting everything on one, you will be able to obtain a better return in the long run. In addition, it is much more realistic and possible to recover the money invested. The amounts that are usually invested are much smaller. 

What does all this mean? Well, it means you will have the possibility to invest without having to risk all your capital in a single transaction. It is the magic of equity crowdfunding! Crowdfunding is wise, this type of investment is one of the best decisions you can make! 

So, if you’ are looking to invest in companies through the alternative of equity crowdfunding, find the platform that allows you to do it comfortably and start researching the companies. You will surely find a couple of them that will attract your attention as much as to bet on them. 

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