Equity Crowd Funding to Revolutionize Startups
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Equity Crowd Funding to Revolutionize Startups

By CIOReview | Monday, February 3, 2014

Fremont, CA: Equity crowd funding is a relatively new practice that is gaining lot of momentum. The practice is helping new companies with limited operating history that are too small to raise capital in the public markets and have not reached the point where they are able to secure a bank loan or complete a debt offering. To the surprise of many, Italy, a country hardly known for its startup friendliness became the first European country to regulate equity crowd funding, even beating the U.S. which rules the world in the number of startups. For it being a first mover is quite an accomplishment and might signal a shift in the Boot's attitude toward startups.

The general hope among industry watchers is that equity crowd funding will open up a new stream of capital for what is called as "innovative companies"—that is, startups under four years old and specializing in high-tech products and services.

"This is an opportunity not just to raise money, but also to create a community of people who will use our products and at the same time, being investors, will care about their growth," says Diaman Tech Daniele Bernardi, founder of Diaman Tech an Italian Startup. In order to foster this idea, the company's crowd funding offer states that, depending on the size of the stake they buy, investors will also get discounts on the company's software. Diaman Tech became the first Italian company ever to launch an equity crowd funding campaign.

The idea of Crowd Funding is spreading like a wildfire. Possible benefit of equity crowd funding is that it could push for companies to adopt a broader and more diverse ownership structure. And, with equity crowd funding open to even small sums, the practice could help turn actual and potential customers into investors.

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