About

Equity Crowdfunding:

Equity crowdfunding is a regulated way for private companies to raise capital from the public by selling ownership shares (equity) in their business, allowing many individual investors to buy small stakes, sometimes for as little as $100 via online platforms. It differs from other forms of crowdfunding because instead of donations, investors often receive ownership and a share of future profits. Companies use it to bypass traditional funding methods like bank loans or venture capital, while everyday people like you and I can gain access to early-stage investment opportunities.  

How it Works:

Company Launches Campaign: A company, usually a startup, creates an equity crowdfunding campaign on a specialized online platform called a funding portal. (Like StartEngine, Wefunder, Republic, etc.) or through a licensed broker dealer.

Sets Valuation & Offers Shares: The company sets a valuation for its business and decides what percentage of ownership (equity) to offer investors.

Public Investment: Individuals can invest in the company, typically by purchasing these small ownership stakes.

Funding Goal Achieved: For CF, If the campaign reaches its funding goal, the company receives the capital, and the investors become shareholders. With Reg A, they can keep the funds from the first dollar that comes in, unless they set a minimum goal on their own even though they don’t have to.

For Investors:

Ownership Stake: You receive a small ownership share of the company.

Potential for Profit: You can profit if the company grows and is eventually sold or goes public or pays dividends.

Accessibility: You can invest in startups with relatively small amounts of money, something usually reserved for wealthy investors.

For Companies:

Access to Capital: You gain a broader pool of potential investors than traditional lenders or VCs. 

Community & Validation: A successful campaign can attract brand advocates and provide valuable market feedback.

Flexibility: You can raise money without giving up large chunks of ownership to a few investors.

Key Differences:

Equity vs. Debt: Unlike debt crowdfunding, where you take out a loan, you are buying ownership. Note: Not all equity crowdfunding offerings are equity. Many use convertible notes (which are debt), SAFEs and revenue share models. 

Here’s an important note that clarifies an easy-to-miss point about “equity crowdfunding.”Even though the umbrella term says equity, the law (Reg CF) allows several types of securities.

Here’s the Breakdown:

Equity (actual ownership)

You receive shares in the company, just like a traditional investor.
If the company grows or is acquired, your shares could become more valuable.
Example: Buying common or preferred stock.

Convertible Notes (technically debt)

These start as a loan to the company (so it’s debt at first).
Later, that debt converts into equity — usually during a future financing round or when certain milestones are met.
Until conversion, you’re legally a creditor, not a shareholder.

SAFEs (Simple Agreements for Future Equity)

A SAFE is a contract, not debt and not yet equity.
It promises you’ll receive equity later if a triggering event (like a priced round) happens.
Common in early-stage crowdfunding because it’s simple and doesn’t require immediate valuation.

Revenue-Share Agreements

Instead of equity, investors get a percentage of the company’s revenue until a target return is paid back.
Think of it as a royalty deal, not ownership.

So the Key Idea:

When someone says “equity crowdfunding” — it doesn’t always mean you’re buying stock.

It simply means you’re investing in a private company through a regulated online offering — and that ownership can take many forms, from common or preferred shares … to revenue-sharing agreements, convertible notes, or even tokenized equity.

In short: you’re backing a business with the potential to grow — not trading a ticker.

Disclaimer: Investing in private securities involves risk, including illiquidity and potential loss of capital. This information is for educational purposes only and does not constitute investment advice or an offer to buy or sell any security.