JD.com launches extensive equity crowdfunding platform in China

on Apr 3, 2015

Crowdfunding can only be described as somewhat of a global phenomenon by now, with ever more numerous subsectors of crowdfunding platforms materialising every day, raising the general awareness of crowdfunding as an investment concept.

Equity crowdfunding is a type of platform that allows large groups of investors to give money to a start-up business in return for a comparable share in the company. If the business succeeds and sees continued growth, then its value will increase and so the value of investors’ shares also go up. If the business fails, the original investment capital is lost. The advantage of crowdfunding however is that the risk is spread amongst many, thus mitigating the potential fallout of such a scenario
One country that is relatively new to crowdfunding in general is China. However, since the country published its equity crowdfunding regulations in December, it has been a steadily growing industry.
JD.com, for example is a huge Beijing-based e-commerce website that recently launched its own equity crowdfunding platform. The site allows start-up businesses to raise money from venture capital firms and qualified investors. The company screens the start-ups wanting to raise funds, whilst also offering advice and support, according to a spokesman for the firm. Investors are also thoroughly vetted and need to meet certain criteria before using the platform, such as providing proof of financial assets with a minimum value of 1 million yuan, or alternatively an individual investor must have an annual income of at least 300,000 yuan per annum.
However, JD.com is not alone in its venture into the Chinese crowdfunding market. One potential rival is CTQuan, which succeeded in raising roughly $4 million last year, from several angel investors, while global goods giant Alibaba launched into movie crowdfunding roughly a year ago. JD.com is currently the largest equity crowdfunding platform in China.
This isn’t the company’s first foray into the crowdfunding sector. Last July they launched a crowdfunding site called Coufenzi, meaning ‘whip-round’ in Chinese. On that platform, money was raised for JD.com’s suppliers and retailers, with investors being able to interact with the fundraisers to determine product design, manufacturing and pricing before choosing whether or not to invest. Impressively this platform raised 280 million yuan and funded over 90 percent of the listed projects.

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