Equity crowdfunding on Equivesto is different than other types of crowdfunding you may have heard of before. Other popular crowdfunding sites are focused on either the Donation model or the Rewards model. As their names surmise, the Donation based crowdfunding model allows supporters to donate funds to individuals with no return, while the Rewards based model exchanges funds for a prepaid item, product, or service. Unlike those two, Equity crowdfunding on Equivesto allows individuals who support companies financially to receive partial ownership in the form of equity shares as compensation.
There’s a long history of projects and initiatives that have been funded through crowdfunding campaigns, but using the equity crowdfunding concept as a model for investing is something that’s new for Ontario, and it comes with a number of risks and caveats that potential investors need to know about. Equivesto intends to mitigate those risks by placing an emphasis on developing robust policies & procedures for compliance, investor protection, transparency, and due diligence. Although there are increased levels of risk, the Equity crowdfunding model makes crowdfunding a viable investment option and offers better potential return than the alternatives.
The Oculus Example
Have your heard about Oculus Rift? It’s an exciting company creating Virtual Reality headsets, most often used for gaming. Several years ago, Oculus raised $2.4 Million on a rewards based crowdfunding site in exchange for a future VR headset they planned to develop. This critical funding helped Oculus grow and develop as a company, so much so that only a few years later, Facebook decided to buy Oculus for $2 Billion.
While that growth was exciting for the company, many initial backers missed out on making some amazing returns. If the $300 for a headset had been an equity investment instead, initial crowdfunding backers could have made $43,500, a return of 145x or 14,500%. Equity crowdfunding creates an opportunity for believers and supporters of start ups to benefit alongside the company when they experience rapid growth and success. Equivesto brings this opportunity to Canada. Become an investor in exciting companies you believe in!