Equity crowdfunding: how UK businesses raise investment from the crowd

Equity crowdfunding is a way for a business to raise money by selling shares to a large number of investors through an online platform. Instead of borrowing and making monthly repayments, you give investors a stake in your company, and they make money only if the business grows in value or pays dividends. For UK businesses, it's most often used by startups and growing companies that want to fund expansion, a new product or their next stage of growth. It can also turn customers and fans into shareholders, which is why it's popular with consumer brands. The trade off is that you give away part of your business for good, and running a campaign takes real time and preparation.

What is equity crowdfunding?

Equity crowdfunding is a form of investment based crowdfunding, where people invest in a business by buying shares in it. The Financial Conduct Authority (FCA) groups crowdfunding into four types: loan based, investment based, donation based and rewards based. Equity crowdfunding sits within investment based crowdfunding and is regulated by the FCA.

The key word is equity, which means ownership. Each investor buys a small share of your company, so the more they put in, the bigger their stake. That makes it very different from the other forms of crowdfunding a business might consider.

• Rewards crowdfunding gives backers a product, perk or early access in return for their support, and they don't own any of your business.

• Donation crowdfunding raises money from supporters who expect nothing financial in return.

• Loan based crowdfunding, often called peer to peer lending, raises a loan that you repay with interest.

With equity crowdfunding, nothing is repaid. Investors are betting on your business becoming more valuable, so that one day they can sell their shares for more than they paid.

How does equity crowdfunding work for a business?

Equity crowdfunding works by listing your business on an FCA authorised platform, which checks your company and then presents your investment offer to its network of investors. Most campaigns follow the same basic journey.

• You prepare your pitch, including a business plan, financial forecasts, a valuation and details of how you'll use the money.

• The platform carries out due diligence on your business and the people running it before agreeing to list the campaign.

• You agree a funding target and the share of the company you're offering in return.

• The campaign goes live for a set period, and investors who pass the platform's checks pledge money in exchange for shares.

• If you reach your target, the platform completes the legal work, new shares are issued and the money is transferred to your business.

• After the raise, you report to your new shareholders on how the business is performing.

Preparation is often the longest part. A campaign that launches with existing customers, contacts or a lead investor already committed tends to build momentum faster, since other investors can see that people already believe in the business. It's worth spending time warming up your own network before the campaign goes public. Platforms usually charge a success fee, taken as a percentage of the amount you raise, and there can be extra costs for legal work, payment processing and producing your pitch materials. Fees vary from one platform to another, so it's worth comparing the full cost before you choose where to list.

Which businesses suit equity crowdfunding?

Equity crowdfunding suits businesses with a clear growth story, a product or brand people can get behind and the potential to become much more valuable over time. Investors are buying into future growth, so a business that plans to stay roughly the same size is unlikely to attract much interest.

It tends to work well for:

• Consumer brands with a loyal customer base, since customers who love the product are often the first to invest.

• Early stage companies that have proven their idea with some sales or users but don't yet have the trading history a lender looks for.

• Technology and innovation led businesses that need capital to develop a product before it generates profit.

• Businesses that want the marketing benefit of a public campaign as well as the money itself.

It's usually a poorer fit for businesses that need money quickly, want to keep full ownership, or have steady profits that could support a loan instead.

How much of your business should you offer in an equity crowdfunding raise?

The share of your business you offer depends on two numbers: how much you want to raise and how much your company is worth before the investment, known as your pre money valuation. Your investors' stake is the amount raised divided by the value of the company once the new money is added. For example, if your business is valued at £1.5 million and you raise £300,000, the company is worth £1.8 million after the investment. The new investors would own £300,000 of £1.8 million, which is about 16.7% of the business. You and your existing shareholders would keep the remaining 83.3%. Setting the valuation is a balancing act. Set it too high and investors may not see enough potential return, so the campaign stalls. Set it too low and you give away more of your company than you need to. Your valuation should be backed by your trading figures, forecasts and how similar businesses have been valued, and the platform will usually challenge it during due diligence. It's also worth thinking ahead about dilution. This is what happens when you issue new shares in later funding rounds, which reduces the percentage every existing shareholder owns. If you expect to raise again in a year or two, keep enough ownership now to stay in control after future rounds.

Finally, consider how hundreds of new shareholders will fit into your company. Some platforms hold crowd investors' shares through a nominee, so a single company appears on your share register on their behalf, which keeps voting and paperwork simpler.

How do SEIS and EIS help an equity crowdfunding campaign?

The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) give your investors generous tax relief, which can make your campaign far more attractive. The relief reduces the amount investors stand to lose if the business doesn't succeed, which can help your offer stand out. SEIS is aimed at very early stage companies, while EIS supports companies at a later stage of growth. Here's how the main limits compare in 2026.

Higher limits apply to knowledge intensive companies, and HMRC sets out the full SEIS conditions and EIS conditions on gov.uk. If you plan to use both schemes, your SEIS raise needs to come first, since a company can't use SEIS once it has received EIS investment. Before your campaign goes live, it's worth applying to HM Revenue and Customs (HMRC) for advance assurance. This is HMRC's early view on whether your company is likely to qualify. It isn't compulsory, but it gives investors much more confidence in your offer. Some activities are excluded from both schemes, including property development, so not every business will qualify. An accountant can confirm whether yours does before you build your pitch around the relief.

What are the pros and cons of equity crowdfunding?

Equity crowdfunding gives you funding without repayments and a community of supporters, but it costs you a share of your business and a lot of time. Weighing up both sides will help you decide whether it's the right route.

The main advantages are:

• There are no monthly repayments, so more of your cash flow can go into growing the business.

• You don't usually need a long trading history, security or a personal guarantee to raise money.

• Your investors often become loyal customers and ambassadors who spread the word about your business.

• A successful campaign is public proof that people believe in your business, which can help when you approach lenders or larger investors later.

The main disadvantages are:

• You give away part of your company permanently, along with a share of all its future profits.

• Preparing and running a campaign takes a lot of time away from running the business.

• Your business plan, valuation and figures become visible to a wide audience, including competitors.

• You'll have more shareholders to report to and keep informed, which adds ongoing admin.

• There's no guarantee of success, and a campaign that falls short can be a public setback.

What are the UK rules for raising money through equity crowdfunding?

UK businesses must raise equity crowdfunding through a platform authorised by the FCA, which is responsible for checking your business and making sure your offer is presented fairly. You can confirm a platform is authorised by searching for it on the FCA's Financial Services Register.

The rules mostly protect investors, but they shape how your campaign runs. Shares in a private company can be hard to sell, so the FCA treats equity crowdfunding as a high risk investment. The FCA warns investors that they could lose all the money they invest if a company fails, and that there's no protection from the Financial Services Compensation Scheme (FSCS). Because of this, new investors go through checks on the platform before they can invest, including a 24 hour cooling off period the first time they use it. These checks can slow down how quickly people pledge, so it helps to bring your own supporters onto the platform early.

The rules on how companies offer shares to the public also changed on 19 January 2026, when the Public Offers and Admissions to Trading Regulations came into force. Offers to the public below £5 million are exempt from the general ban on public offers, so a raise below that amount can go ahead through a crowdfunding platform. Private companies that want to raise more than £5 million can now do so through a new type of FCA regulated public offer platform, which crowdfunding platforms can apply to become.

What happens if your equity crowdfunding campaign doesn't reach its target?

If your campaign doesn't reach its target, you usually receive none of the money. Many platforms run campaigns on an all or nothing basis, which means investors' pledges are only collected if you hit your funding goal, and are returned or cancelled if you don't. This protects investors from backing a business that doesn't have enough money to deliver its plan. For you, it means a target set too high carries a real risk. It's often sensible to set your target at the minimum you need to deliver the plan, then allow the campaign to raise more than the target if demand is strong. A campaign that falls short isn't necessarily the end. Investor feedback can help you rework your valuation, sharpen your pitch or decide that a different type of funding is a better fit for where the business is now.

Equity crowdfunding vs a business loan: which is right for you?

Equity crowdfunding suits businesses that need growth capital but can't yet support repayments, while a business loan suits businesses with steady income that want to keep full ownership. The right choice depends on your trading history, how quickly you need the money and how much control you want to keep.

Many businesses use both at different stages. A young business might raise equity to prove its product, then use business loans once it has the trading history and steady revenue a lender looks for. Borrowing alongside a raise can also help you fund growth without diluting your ownership any further.

Fund your growth with a business loan through Capitalise

If you'd rather keep full ownership of your business, or you need funding faster than a crowdfunding campaign can deliver, a business loan could be the better route. Apply for a business finance with Capitalise and tell us how much you need and what it's for. A dedicated funding specialist will put your application together and match it against our panel of 130+ UK lenders, so you can compare real offers side by side. There's no obligation to accept any offer you receive.