This report looks at equity crowdfunding, where individuals receive small stakes in a privately owned young business in return for investment.

Key findings

• In 2011 alone, 1.5 billion was raised through crowdfunding for projects and businesses in need of funds.
• Crowdfunding takes a number of different forms, the most successful of which has been the reward-based model where participants receive non-financial rewards in exchange for donating to a project.
• Managing co–investment between various investors with different motivations for investing is one task that businesses and platforms will need to master.
• One of the main barriers to the growth of the model thus far is regulation, which has hindered the expansion in the number of equity crowdfunding facilitators

Crowdfunding is big business.

The idea of financing projects or businesses with small contributions from large numbers of people is catching on in a big way and now accounts for significant amounts of money.

The model effectively harnesses not only the contributors' desire for the reward but also the intrinsic or social motivations to back a project.

Other forms of the model are, however, also growing rapidly.

The most recent of these is equity crowdfunding, where individuals receive small stakes in a privately owned young business in return for investment.

Authors
Liam Collins and Yannis Pierrakis