What is Equity Crowdfunding?
Equity Crowdfunding is a method of raising capital where a startup sells shares to a large number of individual investors ("the crowd") via an online platform, rather than pitching a few large VCs or Angels.
In the UK, this industry is dominated by two major platforms: Seedrs (now part of Republic) and Crowdcube.
How it works
- The Campaign: You launch a public page with a pitch video and deck.
- The Goal: You set a minimum funding target. If you don't hit it, you usually get nothing (all-or-nothing).
- The Investors: Anyone can invest as little as £10 or £20.
Equity vs. Rewards Do not confuse this with Kickstarter.
- Kickstarter (Rewards): You give people a t-shirt or the finished product. No equity changes hands.
- Seedrs/Crowdcube (Equity): You are selling actual ownership in your business.
The "Nominee" Structure The biggest fear founders have is: "I don't want 2,000 random people on my legal documents." To solve this, UK platforms use a Nominee Structure. The platform acts as a single legal entity that holds the shares on behalf of the 2,000 investors. On your Cap Table, you see just one line item (e.g., "Seedrs Nominees Ltd"), not 2,000 names. This is essential for future governance.
Why do it? It is often a marketing play as much as a funding play. It turns your customers into loyal brand ambassadors who have a financial interest in seeing you win. Monzo and Revolut famously used crowdfunding to build their cult-like followings.
Key Takeaway: Equity Crowdfunding democratizes angel investing. It’s a powerful way to turn customers into owners, but it requires running a very public, high-pressure marketing campaign.
