Crowdfunding is Changing. Are you Ready?


By Jorge Newbery CrowdFundBeat Contributing Editor

Just six months ago, equity crowdfunding was not yet legal in the U.S. Today, there are close to 1,000 crowdfunding sites in existence—at last count, included 994 crowdfunding sites in its directory.

Despite its incredible growth, many think of crowdfunding strictly in terms of donation-based and reward-based platforms, such as sites like Kickstarter and Indiegogo. But as a result of the Jumpstart Our Business Startups (JOBS) Act, the definition of crowdfunding has expanded.

Thanks to the JOBS Act, small businesses and startups now have greater access to capital. The legislation allows entrepreneurs to publicly seek funding and makes it possible for individuals to become investors, a combination that has led to the emergence of equity crowdfunding—a new opportunity for investors.

What is equity crowdfunding?

With equity crowdfunding, accredited investors provide funding to a private company in exchange for an equity stake in the business. Or they can choose to invest in real estate, whether it’s a commercial property, development project or mortgage. Title III of the JOBS Act would extend the opportunity to unaccredited investors but that piece of legislation is not yet enacted.

In comparison, reward-based crowdfunding offers investors a tangible product or service, often a sample of what the funds are being used to create, as a reward for their contribution. With the donation-based model, investors give to a charitable cause, and under the lending-based form, the individual or company repays investors over time.

A recent report found that companies have raised an average of $178,790 through successful equity campaigns and in the process, sold between 5% and 50% of their companies, with an average of 15%.

A number of equity-based crowdfunding sites have already helped small businesses and startups find the capital they need. CircleUp, which has raised more than $20 million for businesses, provides consumer and retail companies with access to accredited investors, as well as partners like General Mills and Procter & Gamble. Crowdfunder connects entrepreneurs with investors, resulting in almost $62 million in deals to date. And RockThePost has helped innovative startups raise over $23 million and counting.

From a real estate perspective, American Homeowner Preservation has raised more than $4.6 million in distressed mortgage investments, which has helped 440 homeowners and extinguished almost $49 million in negative equity. Other sites like Crowdstreet are making commercial real estate opportunities available to investors.

These sites only scratch the surface of the many options for equity crowdfunding, but the numbers speak for themselves. Many of the top crowdfunding sites are also working to foster crowdfunding legislation and provide more education, in order to cultivate more opportunities for individuals and businesses.

Benefits of equity crowdfunding

When investors make equity crowdfunding a part of their portfolio, they gain both financial and social benefits. By investing in a company, investors earn a share in a property or a company’s success, which can yield monetary returns over time. Returns vary based on the nature of the deal, the amount of equity it affords, and the success of the startup or real estate investment. But there is potential for a strong return: the average company that has raised money on CircleUp has seen its revenue grow at 80% per year since raising money on the site and its gross margins expand from 34% to 39%. On the American Homeowner Preservation site, investors can choose among opportunities with returns of 9%, 10.2% or 12%, depending on the duration of the investment.

And the returns go beyond the financial. On a larger scale, investors are also contributing to job creation and boosting the economy through new business development and real estate growth. With crowdfunding, investors have more opportunities to invest in organizations that have a social impact or support a cause they believe in. They can engage in crowdfunding for social good, putting their dollars to use in a meaningful way that contributes to positive change in their communities.

Potential risks of equity crowdfunding

As with any type of investing, equity crowdfunding involves risks. By nature, equity crowdfunding is a unique type of investment. Because the investments are not part of a public market, investors would likely have difficulty selling their shares if they wanted to do so in the future. Startups are not required to pay dividends, usually choosing to reinvest profits into the business, and they could end up issuing additional shares, diluting value for existing investors.

Even after a company, property development team, or homeowner receives capital through an equity crowdfunding campaign, there is no guarantee they will succeed. Investors may not have a good sense of a company’s operations or growth. And though it will hopefully be rare, fraud is always a possibility.

To help reduce risk, do your research. Check into the security measures of the crowdfunding platform before investing and understand the requirements companies must meet in order to solicit funding. Make sure you feel comfortable with the site as well as the specific startup.

As with any investment, be realistic about what you can afford to lose and diversify to minimize risk. When it comes to real estate crowdfunding specifically, look for platforms that allow you to diversify your investments across a number of properties to further reduce your risk.

How to get involved

Despite the risks of equity crowdfunding, the rewards can be great. If you’re ready to make this type of investment a part of your portfolio, investigate your options by browsing the directories at or and learn more about the top equity crowdfunding sites. With all of the opportunities out there, you’re sure to find one that is a match for you and your portfolio.

About Jorge Newbery

As American Homeowner Preservation’s CEO, Jorge Newbery works to create meaningful social and financial returns for investors, while keeping families in their homes. Newbery founded American Homeowner Preservation in 2008 as a 501c3 nonprofit that worked directly

with banks to modify mortgages and keep homeowners in their homes. He has since guided the evolution of AHP to a crowdfunding platform that allows investors to pool their money and invest in distressed mortgages online.


ForbesThe Ultimate Pre-Launch Crowdfunding ChecklistForbesCrowdfunding is not limited to the platform where you launch your campaign. Instead, it has become a valuable way to transform your idea into a mainstream business. In order to head in that direction, you must execute a number [...]

The AustralianIgniteme heats up crowdfundingThe Australian“The only other comparable film that raised money through crowdfunding would be Crocodile Dundee, but not all funding came from the crowd.” Mr Morello said the idea behind the platform was relatively simple — giving new and bud [...]

DVS Gaming (registration) (blog)Crowdfunding: How Does it Help Indie Developers?DVS Gaming (registration) (blog)2012 is when crowdfunding really blew up, prior to 2012 the average amount of money devs would receive could range from 10k-100k. By today's standards, that's stil [...]

The MemoCrowdfunding has become a 'monster' argues its greatest criticThe MemoBrown has become a thorn in the side of this blossoming industry, even more so as it's clear his blog is now even read by regulators at the Financial Conduct Authority. The Memo sat down with [...]

U.S. News & World ReportNo Cash for Hate, Say Mainstream Crowdfunding FirmsU.S. News & World ReportThe block on mainstream crowdfunding is just the latest blow to far-right activists operating online. In the last 24 hours, neo-Nazi website the Daily Stormer had its domain regi [...]

LivemintFinding the right balance on crowdfundingLivemintSecurities market regulator Sebi (Securities and Exchange Board of India) has been trying to get a handle on digital platform-based crowdfunding since at least 2014, when it issued a cautiously positive consultation paper. It fl [...]

Crain's Cleveland Business'Smaller' gifts can go long way for Clinic's crowdfunding platformCrain's Cleveland BusinessFor an institution accustomed to securing multimillion-dollar donations, Cleveland Clinic's latest fundraising effort has some relatively [...]

Australian Brews NewsBrewery crowdfunding effective overall: PozibleAustralian Brews NewsEquity crowdfunding by breweries overseas has been effective overall, despite some high profile failures, according to Pozible. The largest reward-based crowdfunding platform in the Asia Pacific, [...]

FortuneUncensored Social Network Gab Raises $1 Million in Crowdfunding CampaignFortuneA crowdfunding campaign for Gab, a Twitter-like social network that touts its commitment to freedom of speech, surpassed $1 million yesterday. The company claims it is politically neutral and committ [...]

Crowdfund InsiderIsraeli Crowdfunding Platform ExitValley Self Crowdfunds, Plans UK ExpansionCrowdfund InsiderThe digital platform to book parking anywhere raised $2 million – a portion of that, $270,000, reportedly came from ExitValley. To date the self-crowdfunding offer has raised [...]

CFB Finance


  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |