HomeBlogFAQ Friday: What is Investment Crowdfunding?

It’s FAQ Friday! Every Friday we answer common investment crowdfunding questions.

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What is investment crowdfunding?

Investment crowdfunding is a new type of investing that was opened to the public as part of the JOBS Act. Now, businesses can take back control over how they receive and allocate funding by seeking investment capital from anyone. This new method allows new ventures to raise money from their community alongside bank loans & traditional angel funding.  On average 70% of the funding in a community round is from new accredited investors while 80% of the number of participants are non-accredited.

Alternatively, people can invest money in their geographic area instead of just the stock market. People shop local. Now they can invest local too. 

Founder Perspective: A high growth tech company operating a B2B2C play can leverage its investors to act as sales agents and a method to create a broader opportunity to get intros to strategic B2B channels or supply chain partners.

People also have opportunity to invest in main street businesses. Imagine a new brewery is planning to open in the area. An investor likes craft beer and decides to invest $100 to help the brewery open. That investors friends also like local breweries, and each decide to invest $100 as well. Fast forward to the brewery’s grand opening, and the investor and friends are enjoying the business as patrons watching the community come together in a new main street business. The investors played a direct role in building up their locality and get and if the brewery is successful, they might also see a return.  


How is this different from Kickstarter?

As one of our partners said, it’s like “grown-up Kickstarter.”  The main difference between investment crowdfunding and Kickstarter is what one receives in return. With Kickstarter, a person typically receives a tangible prototype of the product or exclusive access to the product once it’s launched. On the other hand, investment crowdfunding provides access to potential financial returns from revenue shares or dividends, a sense of community from growth in small businesses, and tangible growth from watching your city develop.


What does this mean for founders?

Founders now have more options for raising capital on friendly terms and sharing any returns with those who believe in them and can help their business grow. Compared to Venture Capital which funds 2% of the companies that come their way, investment crowdfunded offerings have a 67% success rate of founders hitting their target goal. In addition, in a study conducted by Crowdfund Capital Advisors, those same businesses have seen 23% Year-over-Year revenue growth rates on average.


So, what does this mean for me?

You have opportunity to be an investor. You just didn’t know it. Local investing provides more than the high risk engagement of potential losses or returns. It provides a more connected relationship to the place people love to live in.  Just like Kickstarter, or an online account where one invests in the stock market, digital platforms called Funding Portals or Broker Dealer platforms, provide an opportunity to learn about the business, understand what the team says the investment will be used for, ask and see Q&A, and directly invest.


How do I get involved?

For founders, we provide educational resources about investment crowdfunding and a 3 month accelerator program for their optionality to raise from the crowd.  See Incolo Launch.

For those curious about what companies are raising from the crowd, we publish a list of opportunities. This is not intended to be a solicitation to invest. It is intended to be educational in nature only. Remember, most companies fail. One should never invest more than they are willing to lose.

For those who want to help their locality and startup companies grow, reach out. We have plenty of opportunities where your simple connections can accelerate the growth of a company.