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Equity crowdfunding is the process whereby people invest in an early-stage unlisted company in exchange for shares. A shareholder has partial ownership of a company and stands to profit should the company do well. The opposite is also true, so if the company fails investors can lose some, or all, of their investment. Previously only wealthy individuals, venture capitalists and business angels, could invest in startups. Equity crowdfunding platforms have helped democratise the investment process by opening the door to a larger pool of potential investors dubbed “the crowd”. Equity investing itself has been around for years but has tended to be the preserve of wealthy business angel investors who are able to invest more than £25,000 in a number of deals.
Equity crowdfunding is a form of investment in which you buy shares in a company that is not listed yet, in the hope that you will profit when the company does well. Commonly with crowdfunding someone will have a start up company idea (it doesn't have to be a start up though), they will present this idea to a given crowd of investors who will then raise funds for it in return for shares in the company. When the company begins to profit, you can begin to recieve returns on your investment. The risk in this is in the company not bringing the anticipated returns, but such is the risk with all other forms of investments.