Equity crowdfunding has allowed startups to raise $166 million, while all categories, equity, rewards, and donation, reached $5.1 billion worldwide in 2013. Crowdfunding has become an alternative source to loans; it matches entrepreneurs in need of capital with investors around the globe. Equity Crowdfunding enables startups to raise funds efficiently from a wider market. It offers new but complex investment opportunity for lenders and investors.
Crowdfuning competes with different subsections of the financial world, such as social lending, social investing, social insurance, digital financial advice, digital investment managers and digital banks. Each category differs in simplicity, business models, and value. Oliwia Berdak (May 6, 2014) states, “social lending provides simple access to quick and cheap credit for borrowers; it is a complex investment opportunity for lenders. Unlike social lending, social investing lets investors find and mimic talented individual investors instead of relying on professionals. It demands significant effort and self-directedness from participants" (Figure 2). Other than social lending, "social insurance aims to change behavior, bringing efficiency and transparency to small claims. It could save customers money" (Figure 2). Another financial subsection is digital financial advice. "Digital financial advice offers individual service to customers who can’t get a financial advisor and a low-cost alternative for those with advisors, but few investors follow through and execute digital advice" (Figure 2). Aside from digital financial advice, "digital investment management is a cheaper alternative, given digital efficiencies, to manage accounts from multichannel wealth managers. However many investors are still reluctant to delegate decisions to a software program" (Figure 2). "Digital banks are a simple proposition, but have few obvious advantages, compared with multichannel banks, beyond efficiency and lack of legacy system" (Figure 2). While these different industries still have hurdles to overcome, Berdak points out equity crowdfunding's potential. Not only has it has made it simple to invest online, but it has also created a business model that connects entrepreneurs with investors more efficiently.
Equity crowdfunding platforms have made funding for entrepreneurs easier because it expands the investor audience globally. Crowdfunding sites give entrepreneurs access to funds while letting them retain control over their businesses. Entrepreneurs retain intellectual property rights over their business and have greater control over how much equity to give away in return for funds.
Entrepreneurs unsuccessfully seeking conventional sources of capital, such as bank loans, to grow their business, can now turn to crowdfunding. With the emergence of crowdfunding, startups have alternatives to social lending. Crowdfunding offers a large base of users and potential experts that can offer insights into the success of a business. Crowdinvesting has made it easier for startups to connect with investors. Crowdfunding platforms bring new ventures exposure to investors and customers.
Crowdfunding has made the online investment process for startups much easier. At Fund Wisdom, we are building our diversified crowdfunding offerings, sorting and matching to improve the investment process. We make it easier to look up different types of startups. Our goal at Fund Wisdom is to improve the process of business owners seeking capital, and help investors identify the largest set of options.
Our multitude of opportunities for investment helps connect investors with startups across the globe. If you are looking to connect with a market of innovators take a look at our investment opportunities.
Berdak, Oliwia, Rachel Roizen, Benjamin Ensor, and Audrey Blumstein. "Disrupting Finance: Crowdfunding." Research : Research : Disrupting Finance: Crowdfunding. Forrester, 6 May 2014. Web. 30 May 2014.