Equity crowdfunding is a method that allows everyday investors, from varying income backgrounds, to invest in early-stage and growth-stage companies in exchange for part-ownership of the business (I.E. Equity). This type of crowdfunding is different from pre-order or rewards-based crowdfunding, which we are currently doing with crowdbazaar on our live platform.
Traditionally, capital raising was dominated by wealthy people, venture capitalists and angel investors. But with equity crowdfunding, everyone can select, invest and become part-owners in start-ups, early-stage and growth-stage companies that they feel passionate about.
Seed stage companies are simply startups in their pre-revenue stage. They raise funds to develop an idea, concept, product or service.
Early stage companies generally have a tested prototype or service model. At this stage, the company may be generating some revenues.
Growth stage companies are operational with an existing customer base. They experience solid growth, but may not be necessarily profitable.
By investing in seed, early or growth stage companies, you get a chance to support a company which is doing something you really believe in and even make money from it. At Crowdbazaar, we want to give you (the ‘crowd’) a chance to invest in companies which are making an impact.
Once you have invested in the company and the offer is finalised and completed, you will become a shareholder in that company and you will be entered into the company’s share register.
Sky is the limit. But every company generally has a minimum and maximum cap per investor. In some cases, you need to meet certain criteria to be “eligible” to invest.
Investing in these types of companies is risky. Even if you strongly believe in the success of the company, your investment is unlikely to be liquid very soon. This implies that you may not be able to sell your shares quickly (if at all). PS you must be prepared to lose every rupee or dollar you’ve invested and only allocate a small proportion of your investible income into startups and early-stage companies.
We cannot stress more on this. Unlike others, who might sell you dreams of getting rich quick, we aim to be transparent and keep you well-informed. Most startups fail or do not deliver positive returns to their shareholders. Invest as much as you are willing to lose. Even if a business succeeds, your investment could be illiquid for a long time and if the company goes through additional rounds of capital fundraising, the equity you hold in that company may become smaller (diluted).
You can sell your shares in the business is if the business makes an ‘exit’. An exit can be in the form of:-
An entity falling within the definition of a “Qualified Institutional Buyer” as defined in the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 as amended from time to time
A Company incorporated under the Companies Act 2013 (of India) or equivalent legislation in force in a foreign country with a minimum net worth of Rs. 20,000,000 (Rupees Twenty Million or equivalent in the currency of the foreign country), the net worth of whom has been certified by a chartered accountant if it is a resident in India and by a certified public accountant or a chartered accountant or a banker if it is a resident outside India, or by a resolution of the board of directors), as may be acceptable to us
An individual (high net worth individual, also called “HNI") who is over 18 (eighteen) years of age and who has a minimum net worth of Rs. 20,000,000 (Rupees Twenty Million or equivalent in the currency of the country where the individual is resident) or more and who has provided a declaration in the form of a certificate certifying/confirming his/her net-worth. Where an HNI is investing through a holding company or such other legal entity, then the net worth requirement of such holding company or other legal entity shall be reckoned on the basis of net worth of the principal shareholder/ owner/ promoter of such company or legal entity. Such a company or legal entity shall provide a net worth certificate by a chartered accountant if it is a resident in India and by a certified public accountant or a chartered accountant or a banker for if it is a resident outside India, or such other certification as may be acceptable to us confirming that its principal shareholder/owner/promoter meets the net-worth criterion applicable to an HNI.
An individual ("Eligible Retail Investor" / "ERI") who is over 18 (eighteen) years of age and who has an annual income (from all sources) of at least Rs. 5,000,000 (Rupees Five Million or equivalent in the currency of the country where the individual is resident) and who has provided a declaration in the form of a certificate, certifying / confirming his/her annual income. Where an ERI is investing through a holding company or such other legal entity, then the annual income requirement of such holding company or other legal entity shall be reckoned on the basis of annual income of the principal shareholder/ owner/ promoter of such company or legal entity. Such a company or legal entity shall provide an annual income certificate by a chartered accountant if it is resident in India and by a certified public accountant or a chartered accountant or a banker if it is resident outside India, or such other certification, as may be acceptable to us confirming that its principal shareholder/ owner/promoter meet the annual income criterion applicable to an ERI.
Note: Apart from satisfying applicable eligibility criteria as stated above, you represent and warrant to us that you are fully authorized by the laws of your jurisdiction, and where applicable, from the perspective of corporate governance norms applicable to you, to participate in the activities of our platform.