What is Equity Investing? What about Equity Crowdfunding? To begin this discussion, we need to start with crowdfunding. Crowdfunding is a particular type of alternative financing that allows entrepreneurs who have projects and needs, but - respectively - do not have all the funds to realize or satisfy them, to try to access the economic resources of third parties through specific online platforms, going to offer their supporters rewards of a financial or non-financial nature.
Equity Crowdfunding, on the other hand, is a form of investment that allows investors to finance start-ups and SMEs set up as corporations: through platforms and online portals authorised by Consob, a financial contribution is made in exchange for equity stakes in the same companies with equity and administrative rights.
The equity-based model therefore provides that the financing is in the form of venture capital and that the investor becomes a full partner of the company proposing the business project.
For security reasons, it has been established that the management of portals is reserved for two categories of subjects: subjects authorized by Consob, registered in a special register kept by the same Authority or banks and investment firms (SIM), already authorized to provide investment services.
Italian regulation of Equity Crowdfunding
Italy was the first country in the European Union to adopt a specific body of law to regulate the phenomenon of Equity Crowdfunding through the enactment of Decree-Law No. 179 of 18 October 2012 (the so-called "Growth Decree bis") and the completion of Consob Regulation No. 18592 of 26 June 2013.
With the subsequent Decree-Law of 24 January 2015 n.3 (so called "Investment Compact") the possibility to raise venture capital online through authorized platforms, is also extended to Innovative SMEs and, with the Budget Law 2019, to all SMEs.
The proposing company through an implementation of a paid capital increase, by issuing new shareholdings, offers the subscription of the same to third parties by means of online portals.
Further reading: Regulation on online venture capital funding, Consob.