Kathy KrayslerValueSetters CMO
Crowdfunding vs. Equity Crowdfunding: What's the Difference?
While these terms are sometimes used interchangeably, there are huge differences between the two types of fundraising.
CROWDFUNDING: Think of crowdfunding as a rewards-based platform. Crowdfunding platforms such as Kickstarter are used to pre-sell products or fund projects.
Investors aren't buying ownership in the company. They are essentially making a donation in exchange for early access to a product, or even for a credit in a movie.
Sometimes these products are fun or artistic, such as a pi-shaped pie pan or a bear-shaped coat.
There is no financial return for people who donate to these products or projects. Even if the product strikes it big, investors won't share in the financial success.
EQUITY CROWDFUNDING:Unlike crowdfunding, which is rewards-based from an investor's perspective, Equity Crowdfunding is ownership-based.
Equity crowdfunding portals such as Netcapital are used to raise larger amounts of money to finance a company's operational growth.
Companies who raise funds via equity crowdfunding are typically innovators who want to disrupt an industry.
If these companies are successful, investors will share in the financial success and could potentially see a huge return on their investment...but they could also lose their entire investment.
To learn more about the differences between crowdfunding and equity crowdfunding, download our infographic: Crowdfunding Vs. Equity Crowdfunding