Equity crowdfunding is a subcategory of crowdfunding, a form of bottom-up financing. This report displays some of the main features of equity crowdfunding in terms of services provided, demand determinants and geographic distribution of the main markets.
Equity crowdfunding platforms, like any other financial intermediary, mainly services two clients. The first includes entrepreneurs who are looking for capital, equity or debt, to grow their business. The second category includes investors who may be individual accredited investors or Venture Capital and Private Equity firms and are looking for opportunities to obtain attractive returns on their investment. Services provided by these intermediaries may vary according to which group is using the service. Moreover, there may be differences in the services provided among the different platforms. This can be considered as part of their strategical diversification to “survive” in the market.
For entrepreneurs, equity crowdfunding platforms manage the phase of fundraising, providing the following services:
1. Overall analysis of both the company and the entrepreneurs: platform providers aim to understand the needs of their clients, the funding targets and to assess their business model. On this analysis, platform providers are able to define a strategy for fund raising;
2. Due diligence and promotion to investors: the first phase is focused on collecting and verifying information about companies, while the second is focused on promoting the companies to investors who are likely to join the business initiative;
3. Fundraising and closing of the deal: after analysis and promotions, platform providers start the crucial phase of raising capital which can last days, weeks, or months. At the end of the time window, entrepreneurs can have access to new capital.
For accredited investors, platforms display several investment opportunities through the following services:
1. Identification of the investors and their investing profiles: information provided in this phase is needed to make software understand what kind of opportunities may interest the different investors
2. Provide information about companies and entrepreneurs: as intermediaries, platforms have interesting and crucial information for investors, which are useful for the decision-making process and the final investment decision
3. Let investors join the companies: when the fundraising starts, investors can subscribe to provide a portion of the required capital to the companies
Every business must analyze what makes them unique and why customers should use their products or services. Equity crowdfunding platforms are no different. Multiple reasons exist for entrepreneurs seeking capital and investors seeking deals to use a crowdfunding platform. A few primary reasons include:
1. Cost savings: platforms can provide the same services of a traditional intermediary, but with competitive prices thanks to the reduced fix costs
2. Streamlined procedures: requirements and phases to join platforms are clear, easy to fulfill, and can often be done completely online at the individual’s convenience
3. Flexibility: thanks to their multiple features, platforms can meet the demands of small sized or newborn companies and private investors
Equity Crowdfunding platform providers are spreading all over the world, from United States to Europe, but also in Middle East (Israel is very active in this field). Some locations are dominating, but the phenomenon is in expansion at the moment.
The graph below shows that the United States leads in terms of capital invested in equity crowdfunding platforms.
The United States also leads in deal count over our observed period with 122 reported deals. Europe comes in second with 59 deals and Asia in third with 10 deals.
Mario Mosiello contributed to this report.
 EquityNet. (n.d.). How EquityNet Works. Retrieved July 26, 2018, from https://www.equitynet.com/how-it-works.aspx
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 FundersClub. (n.d.). Angel Capital Association. Retrieved July 26, 2018, from https://fundersclub.com/how-it-works/
 Sabia, L. (2017, October 07). Equity Crowdfunding: How Market Leaders Are Shaping the Future of the Industry. Retrieved July 26, 2018, from https://themarketmogul.com/crowdfunding-future/
 PitchBook data found using the following keywords: “equity crowdfunding” or “equity crowdfunding platform”