2018 was an important year for business and crowdfunding. We observe how startups from various parts of the world began to be financed through collective help. The method known as equity crowdfunding was one of the most popular ones. Why? Today you’ll discover it.

Equity crowdfunding: A trend in 2018 (and probably 2019)

For those who don’t know yet, equity crowdfunding consists of obtaining financing not in exchange for rewards like in traditional crowdfunding. But in exchange for a shareholding, ergo, the investor will keep a percentage of the company. Proportional to the money invested.

This method of financing popularized a lot among entrepreneurs of small and medium enterprises. Especially those that sought to be private companies. Equity crowdfunding then became a trend in 2018. Especially for entrepreneurs who couldn’t get money in a conventional way.

equity crowdfunding impact 2018
According to Entrepreneur, equity crowdfunding allowed to achieve greater financial equality. Since women and people of color were less likely to obtain investors. Source: TechCrunch

It should be noted that equity crowdfunding not only became a trend in the United States. But in other countries such as the United Kingdom and Spain as well. Nations in which, due to their laws and economy, this method of financing soon became popular.

Already at the beginning of 2017, Entrepreneur predicted growth in equity crowdfunding. Explaining that after the last installment of the JOBS Act in 2016, a door was opened to great opportunities. In this case for small or medium scale businesses that could support themselves financially through family and friends. With crowdfunding!

Equity crowdfunding in the world and other facts

First of all, we must explain that the inclusion of new laws worldwide is what has driven equity crowdfunding so much. In the case of the United States, we can say that now non-accredited investors can invest in private companies and obtain a shareholding. Without any meritocracy or privileges.

According to an article by Asociación Fintech, 63% of businesses financed with equity crowdfunding in Spain surpassed their goals in 2018. That is, they raised more money than they were originally seeking to raise. This is partly due to initiatives promoted by the Spanish Association of FinTech and InsurTech (AEFI in Spanish).

equity crowdfunding in spain 2018
AEFI is responsible for creating monthly events where startups and emerging businesses are made known. Partly so that investors can offer financial support in exchange for shares. Source: CrowdBros

In the United Kingdom we have a slightly different case. There, startups and businesses have been able to become financed on the Internet with equity crowdfunding. Interestingly, Forbes reports that in most cases this method is a final alternative. In case everything fails. Denoting the lack of access to funds by entrepreneurs.

This “lack of access” or difficulty in obtaining investors has been observed in several parts of the world. And unfortunately, sometimes because of bias and/or unbiased preferences as we said at the beginning. But likewise, equity crowdfunding has brought more balance and diversity in the matter.

equity crowdfunding opportunities
Equity crowdfunding also became popular in 2018 simply because it offered more opportunities. Allowing all kinds of new startups run by different people to raise funds. Source: TechCrunch

Without a doubt, we can conclude that 2018 was a very good year for equity crowdfunding. It was possible to observe hundreds of startups achieving success thanks to the participation of more diverse investors. This trend, however, could return in 2019 with much greater force.

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Related: Crowdfunding as a solution to gender inequality

What will equity crowdfunding bring us in the future..?