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Equity crowdfunding is becoming a mainstream source of finance for start ups.

Crowdfunding started as an alternative means of (often) charitable fundraising but is fast becoming a more mainstream method of finance for early stage companies.

Operators such as Kickstarter and lending platform Zopa are now familiar names to plenty of traditional equity investors. But for some of us, this is still a very new concept, which we may not be too familiar with. We asked some of the experts at companies in this industry to help us navigate the potential and pitfalls.

Gonçalo de Vasconcelos from Syndicate Room sums it up: ‘Investors can lose all the money they invested if the businesses go bankrupt, so it’s crucial to diversify. The investment is also illiquid, which means investors can’t sell their shares in a hurry, so this should be seen as part of a medium-term investment strategy. Facebook was probably one of the best angel investments ever and yet it took over seven years to get the fantastic returns.’

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