The big draw of equity crowdfunding is that you open up your company to a potentially much greater pool of investors. Investments of a few hundred (or a few thousand) euros can potentially add up quickly. When signing up to the service as an investor, it asks you how much you have willing to invest in a company, and so far they’ve put together a “potential investment pool” of € 4 312 025,31 worth of hypothetical money.
At launch there appears to be 12 companies gathering interest on the service before they start an official funding round. Companies include a new Vodka brand, a pool-trampoline contraption, and InstaDash, the instagram/pinterest mashup we covered that came out of Sthlm Startup Hack.
When browsing the companies, you can see a brief overview, deeper company information, updates, documents, and recommendations. Investments can only be made during a funding round.
Rather than taking investments immediately and holding them in an escrow account, you sign your interest via an e-document stating that when they reach 100% you will fulfill your commitment of signing the legal documents and transferring the amount you have reserved for.
In Finland we’ve seen a couple different attempts at this concept. Venture Bonsai has been around for some time, and Invesdor popped up recently to also tackle equity crowdfunding. I worked at Venture Bonsai for a short time before joining ArcticStartup, and I was surprised to learn the number of legal challenges concerning who can invest in companies, and even how many people can be made aware of a funding round before a prospectus needs to be filed.
Equity crowdfunding still has a lot of barriers to overcome. Most notably, the general public (investors) need to be educated about how the concept works before they can even consider investing. But equity crowdfunding seems like such a logical concept, that hopefully a startup like FundedByMe will gain traction.