To become Italy's leading public company for sustainable development. To keep growing, consolidating existing projects and launching new ones, all united by the intention of promoting change and awakening a new social and environmental consciousness. This is the challenge we at LifeGate took on at the time of our 20th anniversary, which coincides with the beginning of the decade for the climate. For this reason, we launched an equity crowdfunding campaign that gives each of you the opportunity to become a shareholder in the company, even with a small contribution.

Questions and answers about equity crowdfunding

Especially among those who are not familiar with the subject, it is understandable that some doubts may arise. How exactly does equity crowdfunding work, and what is the difference from traditional online fundraising? Is it really trustworthy? What does it mean to become a shareholder in an SME (small and medium-sized enterprise)? What are the earning opportunities? What happens if at some point you change your mind and prefer to exit the investment?

The right person to ask these questions is someone who has turned crowdfunding into a profession, evaluating hundreds of projects and helping the most deserving reach their goal. That is why Marco Montemagno, entrepreneur and expert in web dynamics, interviewed Dario Giudici, founder and chief executive of Mamacrowd, which is Italy's leading equity crowdfunding platform by capital raised and hosts the LifeGate campaign.

1. What is crowdfunding?

Crowdfunding, in general, is any fundraising from the public. There are numerous web platforms that allow entrepreneurs, associations or individuals to publish their project, giving anyone the opportunity to fund it with an amount that can start from just a few euros.

Within this broad family, several very different systems have become established. Reward crowdfunding, used mainly for cultural initiatives (books, films, records) and new technologies, asks for a contribution and gives a non-monetary reward in return: a thank-you, a gadget, sometimes the product itself as a preview. Donation crowdfunding, on the other hand, provides no reward at all; it is usually the route chosen by non-profit organisations to seek support for their cause. With lending crowdfunding (also known as debt crowdfunding), the company effectively takes out a loan and commits to repaying the amount with interest. Rather than turning to a traditional bank, however, it prefers to receive small sums from many different sources. Equity crowdfunding is the most widespread form in the world of startups and SMEs. Each participant acquires a small stake in the company, becoming a shareholder.

2. How does equity crowdfunding work?

The mechanism of equity crowdfunding mirrors that of the stock market. The company publicly explains who it is and what it intends to do in the near future, asking the public to support its development plan. Those who make a contribution are not driven by a gesture of disinterested generosity (as is the case with donation crowdfunding, for example), but do so because they believe the project is sound and want to obtain a financial return. By committing a certain sum of money, they enter the capital (equity, hence the name) of the company, becoming a shareholder. In practice, it is as if they had bought a small piece of that company.

To raise capital through this system, a company must register with a dedicated authorised platform (such as Mamacrowd, chosen by LifeGate). It must also belong to certain specific categories: small and medium-sized enterprises, innovative startups, innovative SMEs, or collective investment undertakings and capital companies, provided they invest predominantly in SMEs.

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3. Can it be trusted? Is there a law or a supervisory system?

Absolutely yes. In fact, Italy was among the first European countries to adopt comprehensive legislation on crowdfunding, placing it under the supervision of Consob (the National Commission for Companies and the Stock Exchange). In 2013, Consob published a dedicated regulation, which has since been updated on several occasions.

"There are many checks," Dario Giudici assures us, explaining that every platform must have a sufficiently robust structure (in technological, administrative, managerial and other terms) to guarantee certain security standards. In general, "Consob wants to protect the interests of investors in terms of equal treatment, transparency and accuracy of information." This is in addition to standard checks, such as those on anti-money laundering and the absence of criminal records for the company's founders. The platform also verifies, to the extent possible, that the information transmitted to it by the company is accurate.

4. Why did LifeGate launch a campaign?

Only together can we win the climate challenge and secure a future for coming generations. With this conviction, we at LifeGate decided that equity crowdfunding was the best way to open the company to anyone who shares our values, turning it into a public company. A path that will, further down the line, lead to a stock market listing.

Alongside our already established activities, which we want to strengthen ever further, the three pillars of our future development are: an accelerator for innovative startups in the field of sustainability; the development and launch of the LifeGate Education platform for remote corporate training; and the expansion of the network made up of the radio station, the website in Italian and English, and social media, along with the extension of strategic consultancy services for businesses.

5. What is a public company?

A public company, which in Italian translates as "società ad azionariato diffuso" (a company with a widely distributed shareholding), is a company in which strategic decisions are taken by management, but ownership is divided among a great many small investors. Widespread in Anglo-Saxon countries, it is by its very nature an open and democratic model.

6. How can you tell whether a project is sound?

Equity crowdfunding platforms publish a detailed snapshot of what the company currently is, accompanied by a thorough description of the project it has in store for the future. Between the financial statements, pitch, company register extract, business plan and various other legal and informational documents, the prospective investor has at hand all the information needed to judge whether that company deserves their trust.

It is then up to them to decide whether to bet on a startup, which has great growth potential but is still taking its first steps, or whether to prefer a more established business. "As a rule, Mamacrowd favours companies that have already moved past the prototyping and testing phase of their product, so that investors can assess the figures," Dario Giudici points out. This is the case with LifeGate, which has twenty years of history behind it.

7. How do you take part?

The platform is very intuitive. Simply register for free to browse the various projects, with all supporting documents, and take your time deciding. Once you have entered the amount you wish to invest, the system converts it into a certain number of shares. You then enter your personal details, complete a suitability questionnaire in accordance with the law, and give your confirmation. An email will provide instructions for completing payment by bank transfer or credit card.

8. What is the minimum amount you can invest?

Every equity crowdfunding campaign has its own rules; for LifeGate's, the investment starts from a minimum of €200.

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9. What does someone who takes part in LifeGate's crowdfunding receive in return?

Anyone who takes part in the crowdfunding becomes a fully-fledged company shareholder; if they contribute more than €10,000, they also secure the right to vote at the shareholders' meeting. Almost all companies provide for a system of this kind, Dario Giudici points out, because a shareholders' meeting with thousands of small investors would become unmanageable.

It is also important to stress that any equity crowdfunding campaign, including LifeGate's, involves placing a minority stake. This means that a shareholder cannot arrive overnight and take complete control of the company's future, stripping the founders of their authority. "This is an advantage for new shareholders. If I decide to invest in a company, I want it to be managed by the people I have placed my trust in, not by a stranger," Giudici continues.

For every euro invested, moreover, the new shareholder will contribute to the protection of 1 sq m of Amazon rainforest through the Foreste in piedi project. Since 2012, LifeGate, together with the Italian non-profit Icei and the Brazilian non-profit Avive, has been preserving 560 hectares of green area that Brazil has granted on a use concession to the 27 families of the community of San Pedro.

10. What are the opportunities for financial gain?

Equity crowdfunding is an interesting opportunity because, with a small stake, it allows you to enter a company that has significant growth potential ahead of it. If in the future the company increases in value, is acquired by a larger entity, or lists on the stock exchange (the latter being a step LifeGate intends to take), the shareholder will be able to exit the company and collect their financial return. The latter will be proportional to the amount they invested. Before that moment, there is another opportunity for gain: if the company makes a profit, it can decide each year to distribute it (in full or in part) to its shareholders by paying out dividends. To summarise, the shareholder can receive their dividends (if provided for) while waiting for the right moment to make the so-called exit, that is, to exit the investment.

But what happens if something goes wrong and the company goes bankrupt? Becoming a shareholder inevitably brings both privileges and responsibilities. In this case, therefore, the invested capital is lost. However, as this is a limited company rather than a partnership, liability is limited to one's own stake. To put it plainly, someone who invests €200 risks not recovering those €200, but does not in any way put their personal or family assets at risk.

11. Are there taxes to pay?

Like all other investments in the share capital of companies, those made through crowdfunding platforms are also subject to the standard taxation applied to capital income. Simply consult your accountant, who will provide all the relevant advice and include them in your tax return.

Thanks to the so-called "decreto rilancio", individuals can deduct from their Irpef income tax 50 per cent of the amount they have invested in the share capital of a company, but only if the latter is an innovative start-up or innovative SME (which is therefore not the case for LifeGate).

12. If I change my mind, can I sell my shares?

Anyone who takes part in a crowdfunding campaign can sell their shares whenever they choose. If the company has since listed, its securities are traded on the stock exchange. And if it has not listed? In that case, one must find a buyer, make a joint appointment with a notary, and carry out a transfer of shares — exactly as happens when buying or selling a property. "Recently on Mamacrowd we introduced the possibility of subscribing to shares through a fiduciary company. In this case there is no longer any need to go to a notary and bear their costs," explains Dario Giudici.

But how does one find a buyer? Once again, the mechanism is not too different from that used to sell a house, a motorbike or a second-hand bicycle: you simply need to frequent the Facebook, WhatsApp and Telegram groups where enthusiasts discuss these investments.