In a short few months, the number of people who can invest in equity crowdfunding will dramatically increase. In October, the U.S. Securities and Exchange Commission announced a framework for allowing individual investors to participate in the new form of financing, which had previously been restricted to wealthy accredited investors. Those new rules go into effect in May.
Even though this type of financing will feel new to most folks who aren’t accredited, equity crowdfunding has been gaining popularity in recent years, according to an industry report released this week by crowdfunding platform OurCrowd, in partnership with Xconomy Insight, the research division of Xconomy. Just as traditional crowdfunding offers an investor a product for contributing money to a company’s project, equity crowdfunding provides investors equity in a business in exchange for cash. (OurCrowd is a Jerusalem-based equity crowdfunding site for accredited investors.)
The report, which examined venture capital and crowdfunding globally, found that more than 6,000 companies raised $870 million through equity crowdfunding in the 12 months between October 2014 and September 2015. That was up from $386 million in 4,700 deals in the prior 12 months, according to the study.
With traditional crowdfunding sites such as Indiegogo possibly entering the market, and businesses across the globe already working in similar methods of crowdfunding, the potential for growth seems huge.
