EquityNet is North America’s first business crowdfunding platform. Per this EquityNet Review, It was founded in 2005 in Salt Lake City, Utah, and has helped over 1000 companies raise more than $600M in investment capital. The platform has over 20,000 accredited investors (individuals, angel groups, and venture capitalists).
Non-accredited investors aren’t accepted on EquityNet. Today, there are several other crowdfunding platforms, and each has its appeal. Choosing the right bank or financial institution can be difficult, but finding a suitable crowdfunding platform requires some research.
EquityNet has developed patented software tools for business planning, investor analysis, and alternative financing structures beyond equity to facilitate your search. The platform doesn’t offer investment advice or participate in the transactions. Investors contact the companies themselves after using EquityNet’s tools and conducting their due diligence. Here is everything you need to know about EquityNet and equity crowdfunding.
Equity crowdfunding is a method of raising capital where a company offers shares of its equity (ownership) to many investors. Typically, it is done through an online crowdfunding platform. Hence, our EquityNet review.
It allows startups and small businesses to raise funds by selling securities (equity shares or debt) to a pool of investors rather than relying solely on traditional sources like venture capitalists or banks.
It is Kickstarter with equity. Equity crowdfunding is regulated by securities laws, such as the JOBS Act in the US, which aim to protect investors while enabling this form of capital raising. Despite this, it comes with many risks.
Risk of failure
Startups have a high risk of failure. There is no guarantee of success or future returns, even if the funding target is met. Investors could potentially lose their entire investment.
Equity dilution
When a company issues new shares through equity crowdfunding, it dilutes existing shareholders’ ownership stake. Not only that, the value of your shares can decrease over time, even if the company goes to an IPO. There is no guarantee that the stock price will return to your original purchase price. Buying early doesn’t mean that the price will only increase.
Lack of liquidity
Investors may have limited or no options to sell their shares for many years. There is a risk of the investment being tied up for a long period without any returns.
Fraud risk
There is always a risk of fraud, whether a startup or a multinational company. For that reason, investors need to conduct thorough due diligence and be wary of any red flags or unrealistic claims.
Accredited Investors
While some platforms allow non-accredited investors, EquityNet’s services are solely for accredited investors.
Many businesses fundraising on EquityNet seek larger investment rounds that accredited investors, including angel groups and venture capital firms, are better positioned to participate in than smaller non-accredited investors. How do you become an accredited investor?
To become an accredited investor, you must meet at least one of the following criteria set by the SEC.
- Income: At least $200,000 (or $300,000 in joint spousal income) for the last two years, and expect to maintain the same income level in the current year.
- Net worth: Have a net worth exceeding $1M, individually or jointly. This excludes the value of a primary residence.
- Professional certifications/licenses: Hold certain professional certifications or licenses, such as a Series 7, Series 65, or Series 82 license issued by FINRA.
- Certain entities are also considered accredited investors, such as banks, insurance companies, registered investment advisers, employee benefit plans, and trusts with assets exceeding $5M.
It’s important to note that no formal accreditation process or certification exam exists. The companies offering the unregistered securities will verify an individual’s accredited investor status.
These companies typically require potential investors to provide documentation such as tax returns, brokerage statements, and other financial records to prove they meet the income or net worth thresholds.
EquityNet Review of the Platform
Back to our main topic, this EquityNet review. Judd Hollas founded this crowdfunding company in 2005 in Salt Lake City, Utah. Despite starting his career as a chemical engineer, he eventually transitioned into the finance industry before starting EquityNet.
In 2020, the company was acquired by C9 Capital. Hollas briefly left the company but rejoined to lead operations after the acquisition.
Many equity crowdfunding platforms based in the US only allow domestic investors. That isn’t the case with EquityNet. Since the platform is only available to accredited investors, non-US citizens can invest in it as long as their home country allows it. Additionally, unlike other platforms, there isn’t a maximum investing limit.
Patents
EquityNet owns five US patents on crowdfunding technologies, enterprise analysis, risk quantification, and capital marketplace processes.
Investors can use EquityNet’s patented analytics to screen thousands of opportunities efficiently based on their criteria. The tools flag potential issues, compare projections to industry benchmarks, and conduct detailed analyses.
They guide entrepreneurs through an educational process using its software to optimize their business plans according to what investors want to see.
This helps companies present a more polished and investor-ready profile. The platform’s analytical tools provide industry-specific benchmarking, valuation estimation, and investment return modeling unavailable elsewhere.
EquityNet Review of Statistics
Since 2007, Equity Net has been tracking crowdfunding statistics internally. They give a global perspective on the crowdfunding ecosystem for these 12 industries.
- Biotech, pharma & healthcare
- Business Products & sciences
- Communications
- Computers & control systems
- Consumer products & services
- Electronics & instrumentation
- Energy & Utilities
- Financial services & real estate
- Industrial & Manufacturing
- Media & Entertainment
- Software
- Transportation & distribution
The platform offers several free valuable financial metrics for these industries by region and year. Here are a few:
- Funding goal
- Pre-money valuation
- Investor equity
- Prior year revenue
- Current year revenue
- Revenue growth rate
- Market size
- Market growth rate
- Age of company
- Number of employees
Thanks to this data, investors can form a general idea of the market they will be investing in. They can compare the companies they are interested in to similar ones in the same industry. Here are a few of EquityNet’s conclusions since it began compiling crowdfunding internal statistics:
- The average company age is 6.5 years
- The average company size is 13+ employees
- The oldest companies are from the Midwest Region
- The youngest companies are from the Southeast region
- Funding goals increased by 6% from 2020 to 2021
- Average company revenues decreased by 13% from 2020 to 2021
Companies & Investing
What is the process once you’re signed up on the platform? It’s time to browse the list of companies seeking capital, from startups to later-stage growth companies. EquityNet provides many tools to find the right investment and to analyze the data.
As of June 2024, over 4000 companies on the platform seek capital by offering various investments (equity/ownership shares, convertible debt, royalty financing, or grants). You can also find examples of successful campaigns. The amounts raised typically range from $500k to $5M.
It’s important to note that EquityNet itself does not directly facilitate or process any investments. Investors interested in a company connect directly with the entrepreneur, not through EquityNet’s platform.
All negotiations, due diligence, legal documentation, and closing of the investment transaction happen off EquityNet’s platform between the investor and company. It simply provides the tools and marketplace to connect investors and entrepreneurs. That is the main reason the platform is only open to accredited investors.
EquityNet Review of Fees
How does EquityNet make money? Per this EquityNet review for investors, the platform is completely free. They do not pay fees to join, browse opportunities, or use EquityNet’s platform.
Since EquityNet is not a registered broker, there are no transaction fees, carried interest fees, or any other charges for investors if they invest in a company listed on EquityNet.
On the other hand, the platform generates revenue solely from the subscription fees paid by entrepreneurs/companies seeking to raise capital from EquityNet’s investor network. They can choose between two subscriptions. The monthly engagement may look expensive, but it is probably the most effective if the company aims to raise millions.
Final Thoughts: EquityNet Review
To conclude our EquityNet review, EquityNet is a platform unlike any other. Since it is not a registered broker, it is free for investors (no fees or commissions). However, it is important to note that it is only available for accredited investors.
Investors must conduct their due diligence but can use the platform’s patented tools. EquityNet doesn’t participate in the negotiations. It is done between the company seeking capital and the investor. Remember that equity crowdfunding is very risky, and the market is illiquid. Invest carefully!
Frequently Asked Questions
EquityNet is a legitimate equity crowdfunding platform. It has facilitated over $500M in capital raises for entrepreneurs from its network of accredited investors.
EquityNet doesn’t charge investors a dime. It makes money from subscription costs charged to businesses seeking capital on its platform.
Equity crowdfunding allows businesses to raise capital by offering ownership shares to investors through online platforms. Investors provide funding in exchange for equity stakes in the company, with the potential to profit if the business succeeds.
