Equity Crowdfunding: Why the Title III JOBS Act Could Become a Big Disappointment

As crowdfunding has grown to become one of the most widely favored alternatives to raising funds, so did the variety of the forms of the business model. Emerged in the wake of the 2008 financial crisis, crowdfunding gave a second chance to entrepreneurs and early-stage enterprises for survival. With traditional banks less willing to lend, entrepreneurs started to look elsewhere for capital.

A particular variation of crowdfunding – equity crowdfunding – is the one we will be focusing on in this article. As professionals from Nesta define the term, equity crowdfunding is a form of investing that involves many individuals investing online in a business in return for share capital, whether through a dedicated equity crowdfunding platform or independently organized by the company itself.

Some estimations suggest that the global equity crowdfunding market has grown from $400 million in 2013, to $1.1 billion in 2014, to $2.6 billion in 2015. While the professional community may differ in opinions about the future of equity crowdfunding, it is undoubtedly a considerably large industry that made a significant difference in the business community and banking industry.

Equity crowdfunding comes in two shapes. One of them is a set of accredited platforms, which are available to only ...

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