The Equity-Based Crowdfunding Communiqué entered into force upon its publication in the Official Gazette dated 03.10.2019 and sets out the details of raising money from the public through crowdfunding platforms in exchange for shares.
So what are crowdfunding and equity-based crowdfunding?
Crowdfunding is defined as “raising money from the public through crowdfunding platforms, within the principles set by the Capital Markets Board (SPK), in order to provide the funding that a project or a start-up company needs, without being subject to the Law’s provisions on investor compensation.”
Equity-based crowdfunding, in turn, is defined as “raising money from the public through crowdfunding platforms in exchange for shares.”
Activities in which funds are collected through crowdfunding platforms in exchange for rewards or donations, without any share in return, are not subject to the provisions of this Communiqué.
Depending on the outcome funders expect to obtain, crowdfunding can basically be considered under two headings:
Crowdfunding that does not aim at a financial return - In models such as donation-based or reward-based crowdfunding, funders act less out of a desire for income than out of motives such as charity or social support, working to turn an idea they believe in into reality.
Crowdfunding that aims at a financial return - In crowdfunding models, which have two sub-types, equity (partnership) based and debt/loan based, the funders have financial expectations.
- In equity-based crowdfunding, investors invest in the projects of entrepreneurs who need financing and become shareholders in the relevant company.
- In debt-based crowdfunding, investors contribute to the development of a project they believe in while also aiming to earn interest income in return for the financing they provide.
Crowdfunding, a FinTech product, moves the entrepreneurship and investment process into the digital environment and allows more players to become part of the ecosystem. Through crowdfunding, entrepreneurs can announce their projects and ideas to larger audiences in digital channels and reach financing more easily and at lower cost. This matters in particular as a source of alternative financing for groups whose participation in economic life is encouraged, such as micro-scale businesses and women and young entrepreneurs. Investors, for their part, can invest small amounts, spread across different fields, and diversify their risk.
You can access the full text of the Equity-Based Crowdfunding Communiqué, which entered into force upon publication in the Official Gazette, at the link below.
http://www.resmigazete.gov.tr/eskiler/2019/10/20191003-5.htm
