What Is Equity Crowdfunding?
Equity Crowdfunding or crowd funding describes the efforts of individuals who network and pool their resources in support of efforts by other people or companies. This can be in the form of investments or buying shares in projects or in the companies. These days, crowdfunding is usually done on the internet.
Crowd funding can also refers to the funding of a company by selling small amounts of equity or shares to investors. In the United States the JOBS Act signed into law by President Obama on April 5, 2012 allows for a larger number of small investors with fewer restrictions. JOBS stands for Jumpstart Our Business Startups (http://en.wikipedia.org/wiki/Crowd_funding).
Equity Crowdfunding allows for a company or an investor to buy in a startup without the typical commercial online stock brokerage account. For the small investor, by the time the news of a hot startup shows up on your radar, the train has left the station.
Equity Crowdfunding For The Small Investor
Before shares of stocks can be sold to the general public by a company in an Initial Public Offering (IPO), the company has to register their offering through the SEC. SEC regulations states that once a company has filed their offer, the company undergoes a Quiet Period, during which the company is not permitted to to advertise their IPO until after the SEC gives the go-ahead. This is a process that may take two to three months.
For the small investor, being informed early on IPOs allows them the opportunity to get in on the initial offer. This is where the profits are usually made. The small investor can buy equity in a company when it is a startup. As an example, look at a Google and Apple, and look at what their shares are worth these days.
The Case For Equity Crowdfunding
This year, Facebook’s initial public offering (IPO) generated $104 billion for the company, but Facebook had to pay out $176 million to the investment banks that handled the IPO. The investment banks underwrites the initial public offer and charges the company accordingly. What this means is that when a company offers an IPO, not all the money generated by the sales of their shares goes into their wallet (http://seekingalpha.com/instablog/113346-orloff/1100221-what-equity-crowdfunding-could-have-done-for-the-facebook-ipo).
Determining the price of the IPO is complex and IPO may well end up being over-priced, as was widely perceived in the Facebook example.
Traditionally IPOs are underwritten by investment banks. The bank itself commits to buying the shares and in turn resells them (flips), for a profit, to institutional/sophisticated investors before it even closes the transaction with the company. Then the investors turn around and resell it to the retail investors, for a profit, in the open market. The retail investors are the ones eagerly placing the orders through their retail brokers to grab some of these “IPO” shares the second its available for them to purchase. Obviously, at that point, the shares have passed 3 hands and their price has already gone through 2 decidedly upward price adjustments. – http://www.ipovillage.com
Equity Crowdfunding With IPO Village
IPO Village is the first website to offer IPO’s direct to the public on a crowdfunding platform. IPO Village makes pre-IPO investment opportunities (IPOs that are in the quiet period) available to the general public and all investors. Their mission is to give retail investors the opportunity to get in on the ground floor of the IPO investment lifecycle.
How Do You Get In?
Getting in on IPO investment opportunities is easy and straight forward. Just like with a typical commercial online stock brokerage account but without having to open an account and maintain a minimum balance. You simply sign up as a member which is free of charge, review the company and invest.
If You Sign Up, Are You Committed To Make An Investment?
You will be glad to know that the answer is No. The act of signing up simply indicates to IPO Village that you have an interest in participating in the upcoming IPO. If the offering is oversold, there is a first come first served policy on the IPO. You will then be automatically placed in line for the next IPO hosted with IPO Village.
If you are interested in crowd funding, go to IPO Village – Equity crowdfunding NASDAQ IPO.