How does equity crowdfunding work and what are the methods?

The operation process of equity crowdfunding.

Equity crowdfunding refers to the sale of a certain percentage of shares by a company to ordinary investors, who invest in the company to obtain future returns. This model of financing based on Internet channels is called equity crowdfunding. Objectively speaking, there is not much difference between equity crowdfunding and investors subscribing for new shares at the time of IPO**, but in the field of Internet finance, equity crowdfunding mainly refers to earlier private equity investment, which is a powerful supplement to angels and VCs.

1. Participants in equity crowdfunding.

In the operation of equity crowdfunding, the main participants include three components: fundraisers, funders and crowdfunding platforms, and some platforms also have custodians.

1. Fundraiser.

Fundraisers, also known as initiators, usually refer to start-ups or projects that need funds in the financing process, and they publish corporate or project financing information and the proportion of equity that can be transferred through crowdfunding platforms.

2. Funders.

Funders are often a large number of Internet users, who use payment and other methods to make small investments in start-ups or projects that they feel are worth investing in. After the fundraising is successful, the investor obtains a certain percentage of the equity of the start-up enterprise or project.

3. Crowdfunding platform.

The crowdfunding platform refers to the medium that connects fundraisers and funders, and its main responsibility is to use network technology to support and publish the project initiator's creativity and financing needs information in the virtual space for investors to choose in accordance with relevant laws and regulations, and have certain supervision obligations after successful fundraising.

4. Custodian.

In order to ensure the safety of the funds of each investor, as well as the timely return of the investor's funds that are effectively used for start-up enterprises or projects and unsuccessful fundraising, crowdfunding platforms generally designate a special bank to act as a custodian to perform the responsibility of fund custody.

2. The operation process of equity crowdfunding.

1. The initiator of the start-up enterprise or project shall submit the project plan or business plan to the crowdfunding platform, and set the amount to be raised, the proportion of equity that can be transferred and the deadline for fundraising.

2. The crowdfunding platform shall review the project plan or business plan submitted by the fundraiser, and the scope of the review shall include but not limited to authenticity, completeness, enforceability and investment value.

3. After the crowdfunding platform is approved, the corresponding project information and financing information will be released on the network.

4. Individuals or teams interested in the start-up or project can commit or actually deliver a certain amount of funds within the target period.

5. If the target period is closed and the fundraising is successful, the investor and the fundraiser shall sign a relevant agreement, as detailed below; If the fundraising is unsuccessful, the funds shall be returned to the funders.

Through the above process analysis, compared with private equity investment, equity crowdfunding mainly completes the "fundraising" link through the Internet, so it is also called "private equity Internetization".

Lower the threshold for investment and financing. Because the crowdfunding platform has broken through the limitations of the traditional investment and financing model, the intervention of the main investor has relaxed the limit on the amount of co-investors, so that more people can participate in the generation of new projects or new enterprises.

The application of the long-tail effect in the fundraising model encourages innovation: Compared with the traditional equity investment platform, the long-tail effect has a good application in the crowdfunding financing method on the Internet crowdfunding platform.

On the one hand, the Internet has a huge user base and certain social functions, and the information dissemination is more convenient, fast and low-cost. On the other hand, the Internet information is highly interactive, users use the crowdfunding platform to send and receive information, and the project sponsor can not only explain the advantages of the project in the plan, but also invest in some places that are not in the plan or are not clear on the interactive platform. With the help of crowdfunding platforms, borrowers and investors can communicate and interact efficiently at a lower cost.

Equity crowdfunding and equity financing have the following differences:

1. There is a difference in concept. Equity crowdfunding can be seen as a supplement to equity financing;

2. There are differences in channels. The former is based on online, while the latter focuses on offline;

3. The purpose of existence is not boring. The former is to promote brand awareness and integrate resources, while the latter is usually a lack of funds to seek financing.

Legal basisArticle 443 of the Civil Code of the People's Republic of China.

If the pledge is made with ** share or equity, the pledge shall be established when the pledge is registered.

**After the share and equity are pledged, they shall not be transferred, except for those agreed upon by the pledgor and the pledgee. The price obtained by the transfer of ** shares and equity by the bidder shall be paid off or deposited in advance to the pledgee.

The differences between equity crowdfunding and equity financing mainly include: 1. Different entities. General small and micro enterprises of equity crowdfunding.

Most of the public offering entities of equity financing are large enterprises with sustained profitability, while private equity is private small and medium-sized enterprises in the mature stage; 2. The cost is different. Direct financing of equity crowdfunding reduces the financing cost of small and micro enterprises, and the hidden cost of equity financing is very high; 3. Different channels. Equity crowdfunding is carried out on the Internet platform, while equity high-level and wide-ranging financing is operated offline.

Legal basis

Article 3 of the Administrative Measures for the Issuance of Listed Companies may be issued to unspecified targets or to specific targets. Article 179 of the Criminal Law of the People's Republic of China: Whoever, without the approval of the relevant competent state departments, issues ** or corporate or enterprise bonds without authorization, and the amount is huge, the consequences are serious, or there are other serious circumstances, shall be sentenced to fixed-term imprisonment of not more than five years or short-term detention, and/or a fine of not less than 1% but not more than 5% of the amount of illegally raised funds.

Hello, equity crowdfunding is a new type of investment and financing model based on the Internet crowdfunding platform in the form of equity transfer and transaction, that is, the company sells a certain proportion of shares to raise funds for public investors; Investors can obtain corporate development benefits by investing in equity and becoming shareholders. Equity financing refers to the financing method in which the shareholders of an enterprise are willing to give up part of the ownership of the enterprise and introduce new shareholders through the capital increase of the enterprise.

In fact, both in terms of concept and investment process, there are many similarities with equity financing. However, the two are very different in terms of emphasis.

Financing channels are differentThe financing entities are different

Equity crowdfunding financing is generally carried out by small and micro enterprises in the start-up stage. Equity financing is divided into public and private placement, public equity financing is to raise funds through the issuance of enterprises to public investors in the market, and the issuers are mostly large enterprises with sustained profitability; Private equity is the main way for mature private SMEs to carry out equity crowdfunding financing.

Positioning is different

The positioning of equity crowdfunding is an information service platform for investment and financing, and the objects of service are mainly in two aspects: on the one hand, the financing party, China's small and micro enterprise group, enterprises that have entered the angel round, or enterprises that have entered the VC A round of financing; On the other hand, there are a large number of potential social investors in China.