Yang Yong, also a major funder of the JRCoffee, opened his first crowdfunded cafe, the 1898 cafe, late last year in Zhongguancun, China's Silicon Valley. All 200 investors of Yang's cafe are Peking University alumni.

While many crowdfunded coffee shops have closed, 1898's success has provided Yang with plenty of opportunities to talk about his business model. In fact, now he calls himself a preacher of crowdfunding.

"I think equity crowdfunding among acquaintances has more potential for entrepreneurial projects, compared with debt-based crowdfunding in China. Chinese people don't trust crowdfunding Internet sites. China is a nepotistic society; sometimes people trust the binding force of friendship more than a legal contract," said Yang.

The cafe has hosted more than 200 crowd-sourcing seminars since its establishment. "We also provide a platform for funders to share experiences such as raising children," said Yang.

"We always thank Tencent and its messaging app WeChat, which provided instant communication tools for 200 funders," he said.

The potential size of the market in China is huge, said Conor Roche, associate director at BOP Consulting in China, and director and cofounder of the consultancy company Fieldwork.

"If regulation facilitates inward and out-ward international investment, perhaps through the Shanghai Pilot Free Trade Zone, that could develop a whole generation of cross-border entrepreneurs from China," said Roche.

"If equity crowdfunding lives up to its potential, it will be used as a funding tool across a broad spectrum of projects, from small ideas to the expansion of large multinational businesses," said Roche.

In the US, the JOBS (Jumpstart Our Business Startups) Act of 2012 declared that equity crowdfunding is a legal means of raising capital in the US, but the Securities and Exchange Commission mandated that an investor in such projects should have more than $1 million capital of net worth to protect against fraud.

"Equity crowdfunding has the potential to encourage atypical investors by lowering investment costs, and regulation should protect but liberalize investment opportunities for the general public," Roche said.

Zhao Xijun, deputy dean of the school of finance at Renmin University of China, noted a legal gap between regulations and a law addressing equity crowdfunding that is still being written.

"Equity crowdfunding is still at an early stage of development. The government should launch related regulations as soon as possible to lower the risks for investors," Zhao said. In late July, Zhang Xiaojun, spokesman for the China Securities Regulatory Commission, said the agency is stepping up efforts to draw up equity crowdfunding regulations.

Yi of JRCoffee said there are three lines that must not be crossed: The number of investors cannot exceed 200; fundraising should only be among acquaintances; and investors should never be lured with a promise of high returns.

Chen Wen, an analyst with Chinese New Finance Research Institute of Peking University, said the equity crowdfunding projects contain high moral hazards as most of them derive from networks such as alumni.

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