equity crowdfunding

Definition

Raising capital from numerous small investors through online platforms, democratizing access to startup investment and the opportunity to lose money on early-stage companies. Kickstarter, but instead of getting a T-shirt, you get illiquid securities.

Example Usage

They raised $1M through equity crowdfunding on Republic, attracting 500 investors who each put in an average of $2,000.

Origin

Enabled by the JOBS Act of 2012, which loosened restrictions on soliciting investment from non-accredited investors

Fun Fact

Despite enthusiasm about democratizing startup investment, most equity crowdfunding campaigns fail to reach their targets, and successful exits remain extremely rare.

Source: Alternative financing and securities regulation terminology

Related Terms

Beginner

Series A, B, C

Sequential institutional funding rounds designated by letters, theoretically indicating maturity but practically just measuring how much money you've convinced people to give you. The alphabet of ambition.

🚀 Startup / VC

Advanced

j-curve

The pattern where a venture fund initially shows negative returns as it deploys capital and pays fees, before (hopefully) shooting upward when investments exit. A graph that looks like the letter J, assuming your fund doesn't remain in the vertical downstroke forever.

🚀 Startup / VC

Intermediate

cliffs

A sudden, catastrophic drop in value, performance, or viability—the moment your startup's growth chart becomes a ski slope in the wrong direction. Often used in VC circles to describe what happens when a company hits its scaling limit without a parachute.

🚀 Startup / VC

Advanced

claw-back

A provision allowing limited partners to reclaim previously distributed carried interest from GPs if later losses reduce overall fund returns. The nightmare scenario keeping fund managers up at night.

🚀 Startup / VC

Intermediate

SAFE

Simple Agreement for Future Equity—a Y Combinator innovation that lets startups take money now and figure out the valuation later. 'Simple' is debatable; some lawyers call them 'complex convertible debt without the debt.'

🚀 Startup / VC

Intermediate

Market Validation

Proof that real customers exist, will pay for your solution, and actually want it—separating your assumptions from reality, though many founders skip this step entirely.

🚀 Startup / VC

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