Equity Crowdfunding: Returns, Financial Markets, and Future Trends

This essay examines the role of equity crowdfunding within financial markets, tracing its history from the 1700s to its modern form, highlighting key milestones such as the emergence of platforms like ArtistShare and the impact of the JOBS Act. It assesses the viability of equity crowdfunding as an alternative form of financing, particularly for small and medium-sized businesses, and its support for innovative ideas. The analysis includes a discussion of the risks and returns associated with equity crowdfunding investments, emphasizing the uncertain nature of startup ventures and the importance of both financial and non-financial motives. The essay also explores different types of equity crowdfunding, the challenges investors face in analyzing projects, and the factors contributing to successful campaigns. It concludes by underscoring the need for robust systems to protect ideas and ensure that crowdfunding platforms are selected based on the specific needs of the business project.

ADVANCED SECURITY
MARKET AND
FINANCIALS

MAIN BODY
Equity crowdfunding has long and rich history with roots going back to 1700s. It is
successfully occurred in 1997 through online donation which was a unique way of financing.
Artist share was first platform of Equity crowdfunding 2000. in 2008 it enables people to donate
funds easily by removing the middleman also in 2009 platform for creative projects supported
by friends, fans, and family, so they can also get reward for it. After that Equity crowdfunding
industry becomes popular platform for entrepreneurs for financing. And in 2011 it started
growing rapidly, because small and medium scale business started taking interest in this source.
Then one job act also made for this source which is 'Equity crowdfunding bill'. Fundable
Launches the first business Equity crowdfunding platform (Petruzzelli and et.al., 2019.). The
history of financial market and finance is always fluctuating between economic cycles usually
caused by structures that enable opportunities. The growth of Equity crowdfunding as a new
alternative form for financing is very supportive for all types of business and also very important
for both domestic and internal markets.
It can be considered as one of most viable option available because of emergence of
financial technology. It is used by most business as it supports new creative and innovative ideas.
As in many countries, entrepreneurs keep an eye on international business with famous platforms
like Indiegogo and Kickstarter, with domestic platforms to reach local audience of country. The
biggest Swedish Operator is FundedByMe have networked of many registered investors which
is good platform for that country and nowadays ICOs is also new Equity crowdfunding (Stanko
and Henard, 2017. ). Crowding funding helps in raising finance easily and very fast as compared
to other financial resources. It also gives various ideas so more innovativeness and creative
products and services can be introduced
The return on equity crowfunding is not guaranteed that whether the investor will get the
return or not. This is majorly because of the reasons that when the person invest in the Equity
crowdfunding is generally for the start- up business and it is not necessary that all the start- up
are successful. Thus, it might be possible that the return which the investor gets over the Equity
crowdfunding is not that much or even it can be in negative. The long- term view of this return
involves the bearing of the risk that whether the company will be earning the profit or not. this is

majorly because of the reason that if the company will earn a good amount of profit then this will
increase the return which the equity investor will be getting.
On the other side the external investor of the project receive a good return over their
investment in form of equity crowdfunding. This also involves the non- financial motives as well
in the company (Wang and et.al., 2018). In contrast to this, the JOBS act also restricts the
secondary market for the issuance of the shares in the first year. On the other side in the absence
of the liquid secondary market the crownfunder has the benefit of realizing good return over their
investment within the post offering deals. in addition to this occurs as the additional equity
offering assisting the company in providing more return to their investors.
While Return on Equity crowdfunding cannot compete with huge monetary donations
from government end but it makes human connection which was missing from past years
(Fleming and Sorenson, 2016.). There are various types of Equity crowdfunding which are
chosen by businesses according to their need and condition of investment. Which have some
drawbacks also that not all type of projects that apply to crowding are onto that platform. The
investors need to assure him before investing about project that time and money required to
analyse that fund invested by him is in right hands or not, some failed projects can spoil
reputation of business, lack of money as compared to targeted amount will results in returning
money to investors. Lot of time is required to raise money because in Equity crowdfunding
businesses need to publish their projects.
Return on Equity crowdfunding system should include various factors which are proper
platform should be selected according to type and need of business, the company should their
experiences of Equity crowdfunding as they analyse, capture and have experience of previous
activities. Also, should make sure that company is ready for Equity crowdfunding (Kumar and
Ramakrishnan, 2019). There is possibility of stealing idea so system should develop such
software so idea cannot be misused by other person. There are several successful Equity
crowdfunding campaigns that helped campaigns to reach their financial goal because they have
adopted all factors that can be useful to be successful. As there are various platforms available
for sources of fund one should go with the option that fulfil every need of business project.

REFERENCES
Books And Journals
Fleming, L. and Sorenson, O., 2016. Financing by and for the masses: An introduction to the
special issue on Equity crowdfunding. California Management Review. 58(2). pp. 5-19.
Kumar, V. and Ramakrishnan, D., 2019. Equity crowdfunding. MANAGEMENT INNOVATOR.
12(2).
Petruzzelli, A. M. and et.al.,2019. Understanding the Equity crowdfunding phenomenon and its
implications for sustainability. Technological Forecasting and Social Change. 141. pp.
138-148.
Stanko, M. A. and Henard, D. H., 2017. Toward a better understanding of Equity crowdfunding,
openness and the consequences for innovation. Research Policy. 46(4). pp. 784-798.
Wang, N. and et.al., 2018. Understanding the importance of interaction between creators and
backers in Equity crowdfunding success. Electronic Commerce Research and
Applications, 27, pp.106-117.