What is Equity Crowdfunding?

What is Equity Crowdfunding?


You’ve probably heard the term “crowdfunding” before, likely in the context of a Kickstarter campaign or a GoFundMe page. At the most general level, crowdfunding refers to a financing model in which small sums of money are collected from a large pool of people (the crowd).

Equity crowdfunding uses this same model, but instead of offering products or perks, funders receive a percentage of ownership, a financial stake in the company, or the right to future revenues or crypto-assets with an aim to earn a return.

How is it different?

There are essentially three kinds of crowdfunding: reward-based, donation-based and equity-based.

  1. Reward-based crowdfunding

Is when you contribute money and get a reward or product in return. This is mostly used for creative campaigns, and there are often different levels of rewards, or perks, that correspond to pledge amounts. Think Kickstarter and Indiegogo.

  1. Donation-based crowdfunding

Is when a funder contributes to a campaign without expecting any perks or value in return. This is mostly used to fund charitable causes, like funding to build a wall in Kenya, or personal expenses, like helping pay a friend’s medical bills. Think GoFundMe, YouCaring and CrowdRise.

  1. Equity crowdfunding

Which includes accredited crowdfunding and open-access regulated crowdfunding.

  • Accredited crowdfunding allows companies to raise funds from high-net worth individuals and institutions. AngelList and FundersClub are two of the best examples of these platforms.

  • Open-access regulated crowdfunding invites anyone to invest in a company in exchange a slice of the financial pie, or the right to money or future crypto-assets (you may get perks too). Republic was one of the first licensed platforms to host this type of crowdfunding

Why we’re excited

Because more investors means more startups, and more startups means more innovation and progress.

Why you should be excited too

  • You now have access to vetted & screened companies

  • You can invest comfortable amounts as easily as you shop online

  • You can get involved in the exciting world of angels, entrepreneurs and startups