How Equity Crowdfunding Can Help Your Startup

You have more than likely heard of crowdfunding, but are you aware of how large this movement has become in recent years? Finally, do you know about the impact FinTech is having on crowdfunding?

 

 

Prior to the internet and the emergence of FinTech, crowdfunding was a much more laborious process involving benefits or mail-order subscriptions. Generally, it was used by people in creative fields (authors, theatre companies) and contributors would gain access to the product they helped fund.

Then came the internet, vastly increasing our access to the general population, and then FinTech entered the scene. The advancements that have come with the evolution of FinTech have changed how startups (and this includes FinTech startups) seek out and obtain funding. Rather than relying on loans or large contributions from established investors, startups can amass the necessary capital from a large body of donors through an online payment system.

Because of this advancement, we are now very much at the point where FinTech is helping FinTech. New FinTech startups can access the technology FinTech has brought to the table in order to fund their development and bring their product to the market through equity crowdfunding.

Although many people today are familiar with crowdfunding, equity crowdfunding is not as familiar—likely because it just came to the table in June 2015. Equity crowdfunding seeks to dismantle the system in which only the wealthy are offered the opportunity to invest in startups. It follows much of the same path as crowdfunding, but differs in its reimbursement system. Rather than receiving a product or service for your contribution to the crowdfunding drive, equity crowdfunding provides shares to contributing parties. This is actually the ideal opportunity for people who want a stake in a company before it goes public. Through platforms like StartEngine, startups can create profiles and build campaigns and investors can offer financing in exchange for securities.

The StartEngine process is set up so startups can “test the waters,” checking to see if there are in fact any investors that are interested enough to offer financing and investors can do their research on the company. Once it’s been established that there is a solid interest in the startup, the company seeks approval from the SEC and the investors are contacted to arrange financing. Once funding is established, these investors are given constant updates on the startup’s process.

FinTech is changing the game and leveling out the playing field in so many ways. If you are aiming to find funding for your startup or get a stake in an up-and-coming business field, FinTech has the technology you need to find your answers. How fantastic is that?