Ye Dagang has his own definitions of starting up a business - one is to establish a company with real business, the other is to invest in startup companies through equity-based crowd-funding.

"Equity-based crowd-funding, a relatively new and innovative financial tool designed to help startups and small businesses, will allow more non-professional investors to make money based on the Internet service," said Ye, chief operating officer of Shenzhen Qianhai Crowd-funding Finance Service Co.

Traditionally, a startup looks for investment depending on bank loans or financial support from friends and relatives, according to Ye.

"In the era of booming Internet finance, a startup company can more easily raise capital, not only depending on bank loans but on equity-based crowd-funding as the new model targets projects, especially innovative and small businesses," Ye said.

Shenzhen Qianhai Crowd-funding Finance Service Co, which has launched the online crowd-funding platform, Yunchou.com, is one of typical innovative Internet finance service companies that have emerged in Shenzhen.

"Following the central government's plan to encourage startup and innovative businesses, there are a growing number of new and small companies which are in need of raising capital to expand their business," said Ye.

Equity-based crowd-funding could well meet the demand of startups by providing finance in support of third projects with a certain portion of equity as a reward, incentivizing investors by allowing them a piece of the pie in a budding startup business, according to Ye.

Since launching Yunchou.com a year ago, the platform, which became one of eight members approved in January by the China Securities Regulatory Commission to conduct equity-based capital raising business, has helped raise more than 100 million ($15.63 million) for about 30 startup projects, according to Ye.

To boost public capital-raising to support innovative business, the authorities in Guangdong province, China's longtime test ground for reform and opening-up, has issued a pilot scheme to develop the equity-based crowd-funding business, aiming to develop 50 platforms that provide Internet-based finance service by the end of the year.

According to the plan, Guangdong will raise as much as 500 million yuan for 400 innovative projects through equity-based crowd-funding service platforms this year.

The pilot scheme, issued by Guangdong Financial Service Office in July, will take effect in September. According to Ye, the pilot scheme is more like official status for equity-based crowd-funding business, which was, in the past, considered by some as similar to illegal fundraising.

"As a brand new fundraising model, Internet-based crowd-funding is different from illegal fundraising as it is subject to the relevant laws governing fundraising," Ye said.

According to the Corporate Law, a limited liability company should be established by no more than 50 shareholders that make a capital investment. Guangdong's pilot scheme has required third-party crowd-funding platforms to conduct their business strictly in accordance with the law. According to Ye, startup projects should be promoted on the platform only after they have been strictly assessed by industry insiders.

"The project will allow public fundraising after it is invested by a leading professional investor," said Ye.

Sun Yuchen, chief executive officer and founder of Raybo Technology Co Ltd, said: "Equity-based crowd-founding would help diversify investment risks as investors will no longer invest in a single project."