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Last week, the Swedish crowdfunding platform FundedByMe launched an equity-based crowdfunding service, aptly named FundedByMe Equity.
The project has been in the works for some time. On Wednesday, the platform opened the beta version of its equity crowdfunding site to the general public.
Currently, 11 companies (and one example) are listed on the platform, though investors are not yet allowed to give them money. That's because all the companies are in an ‘awaiting interest’ phase, which means they are gathering information about potential investors.
Keeping in mind the Swedish regulations around investing, the FundedByMe team has developed a unique equity crowdfunding process. In Sweden (like in the U.S.), private companies may not advertise investment opportunities to the general public. Only those potential investors who express early interest in supporting a company can purchase stock. Laws also dictate the number of investors a private company can have – a maximum of 200, according to FundedByMe’s FAQ section.
Since the number of crowd investors is relatively small (one company listed on the platform, for example, is looking for a maximum of 20), communication will be essential to make the funding rounds successful. This dialogue will benefit both the potential investors, who will need to conduct their due diligence before investing in a company, and entrepreneurs, who can pick the investors that are the most likely to have a positive effect on the company.
It is ultimately up to the entrepreneur to select which potential (‘interested’) investors are offered shares. The platform operates under an all-or-nothing model, which means companies have 90 days to raise all the money they specified, or they get nothing.
Along with expressing interest and investing in a company, a user can also contribute by offering guidance or working for it. Therefore, FundedByMe acts more like “a meeting place for interesting companies and persons or companies interested in [their] business” than an investment marketplace. The platform makes it clear that it does not have control over the capital at any time, and is not involved directly in the signing of the contract of sale or is offering any sort of investment advice. For its services as a matchmaker of sorts, FundedByMe collects a 6% fee, though some campaigns will be charged less.
Northern Europe has seen a number of platforms pop up offering both equity- and donation-based crowdfunding, all looking to open up investing opportunities to large groups of people with small sums of money to invest.
“We are adding equity-crowdfunding to a functioning system not only because we can or because we see a huge growth within this market, but [also] because our clients have asked for it,” wrote FundedByMe CEO and co-founder Daniel Daboczy in an email to Crowdsourcing.org announcing the launch.
FundedByMe claims that its members have a “total capacity of 4,897,835.63 € to invest this year,” which comes out to roughly $6,260,000. The site came up with this number by asking potential investors how much they’d hypothetically be willing to donate this year.
It remains to be seen how much of that money FundedByMe Equity and its Nordic competitors will actually be able to channel to small businesses and entrepreneurs. But by the looks of it, snowy Scandinavia is quietly developing into a crowdfunding oasis.