What is equity crowdfunding?

Rights crowdfunding refers to the company selling a certain proportion of shares to ordinary investors, and investors get future income through investing in the company. This financing model based on internet channels is called equity crowdfunding. Another explanation is that "equity crowdfunding is the internetization of private equity.

Equity crowdfunding can be divided into two categories from the perspective of whether there is guarantee or not.

1. unsecured equity crowdfunding: unsecured equity crowdfunding refers to the guarantee responsibility of investors who have no third-party companies to provide relevant rights and interests during crowdfunding investment. At present, there are basically unsecured equity crowdfunding in China.

2. Guaranteed equity crowdfunding: It means that this guarantee is a fixed-term guarantee responsibility while the equity crowdfunding project is crowdfunding. However, so far, this model only provides guarantee services for domestic crowdfunding projects with loans, and has not been accepted by most platforms.

Because equity crowdfunding involves legal risks such as private placement, the main manifestations are:

Risk of touching the red line of public offering of securities or "illegal fund-raising"

There is a risk of investment contract fraud.

The rights and obligations of equity crowdfunding platform are vague

So far, equity crowdfunding has been clearly under the supervision of the CSRC. The Guiding Opinions on Equity Crowdfunding Platform in Preparation proposes that the number of shareholders of the company shall not exceed 200, the investment amount of a single shareholder shall not exceed 25,000 yuan, and the overall investment scale shall be controlled within 5 million yuan. Therefore, at present, equity crowdfunding has gradually begun to be supported by national policies.