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Crowdfunding in the investment environment is the process of raising funds from a number of investors for a given company seeking investment. Companies can raise capital through the issue of shares or bonds in a company. Investors make tax efficient share investments using SEIS/EIS tax relief and in Bonds through the use of the tax free IF-ISA tax wrapper.
Crowdfunding is the process of raising finance funds by having numerous of investors investing an amount of money into a given company, which is seeking funds. Companies can raise capital either through equity or debt funding, and in return the investors are given shares or bonds in the company.
The crowdfunding industry itself is not a new concept. As far back as 1606 the Dutch East India Company used the power of the crowd in order to fund the lucrative venture of conducting trade between Europe and Asia. But driven by a lack of finance for small enterprises, caused by the 2008/09 financial crisis, along with significant advancements in the growth of the Internet, the crowdfunding industry has boomed in the past few years.
How it works at Crowd for Angels
Companies create a pitch on the Crowd for Angels platform by showcasing their business and setting out the reasons they are seeking the investment. As a part of this process, companies must decide on a 'minimum' and a 'maximum' funding target they are looking to raise. Furthermore, companies must specify the valuation and therefore the price of the shares they are offering in an equity offering or the interest rate they are willing to offer investors on a bond issue.
Companies are given 60 days to complete the raising of funds. If they are not successful, any committed funds collected will be returned to the investors' accounts on the Crowd for Angels platform. If a company is successful in reaching its funding target Crowd for Angels will request its lawyers to prepare the Subscription Agreement between the Company and Nominee acting for the investors so that the investment can take place.