The following is an extract from a blog by Edward Whiting. You can read the full blog here:
If crowdfunding was the next big thing in 2010-11 (with Nesta estimating that €1.5bn was raised for crowdfunding projects in 2011 alone), then equity crowdfunding is making a strong case to follow suit for 2012-13.
The concept is pretty simple – take the concept of getting lots of people to give a little bit of money to help make your project happen, and instead of offering them kooky rewards (like your name weaved into the side of a bus) you offer them a stake in your company. If your business idea takes off, your backers- from £10 upwards – get a share of the return. The vast majority of equity offered in this space so far has been non-voting, so if you’re a crowd-investor you’d have to sit tight and cross your fingers to hope your company does well.