When raising capital through equity crowdfunding, startups have several ways to structure their investment offering. These structures determine what investors receive in exchange for their money — whether it's direct ownership, a future promise of equity, or repayment with interest.

Understanding the types of offerings is crucial for both founders planning a raise and investors deciding where to put their money.

In this post, we’ll break down the four most common types:

• Equity Offerings

• SAFEs (Simple Agreements for Future Equity)

• Convertible Notes

• Debt Raises

Let’s explore how each works — and when they’re appropriate.

1. Equity Offerings

What It Is:
In a traditional equity offering, investors receive shares of ownership in the company — usually common or preferred stock. This is a direct stake in the business.

How It Works:

• The company is assigned a valuation (e.g., $5 million pre-money).

• Investors purchase shares at a set price per share (e.g., $1/share).

• As shareholders, investors may have rights to dividends, voting, and proceeds in the event of an exit.

Best For:

• Startups with a clear valuation

• Founders who want to offer ownership directly

• Investors seeking transparency and immediate equity

  
  

2. SAFEs (Simple Agreements for Future Equity)

What It Is:
A SAFE is not equity today — it’s a promise that the investment will convert into equity later, typically during a future priced round.

How It Works:

• Investors fund the company now.

• When the company raises its next round (at a formal valuation), the SAFE converts into shares.

• Terms often include a valuation cap, discount, or both.

Example:
An investor puts in $5,000 on a SAFE with a $3M valuation cap. Later, the company raises a Series A at a $6M valuation. The investor's shares convert as if the company were worth $3M — effectively getting a better deal.

Best For:

• Early-stage startups with uncertain valuation

• Quick fundraising with low legal complexity

• Investors willing to wait for equity

  
  

3. Convertible Notes

What It Is:
A convertible note is a loan that converts into equity in the future — like a SAFE, but with the added feature of interest and a maturity date.

How It Works:

• Investors provide a loan to the startup.

• The loan includes an interest rate and maturity date.

• At a future funding round, the loan (plus interest) converts into equity, typically at a discount or valuation cap.

Best For:

• Startups that want to raise quickly but still offer equity later

• Investors who want downside protection (e.g., repayment in rare cases)

  
  

4. Debt Raises (Revenue Share or Traditional Loans)

What It Is:
In a debt raise, investors lend money to the business with the expectation of repayment over time — with or without interest. No equity is involved.

Types:

• Revenue Share: Investors are repaid from a percentage of company revenue until a fixed return is hit.

• Term Loans: Fixed repayment schedule over time, with interest.

Best For:

• Companies with consistent cash flow

• Founders who want to retain ownership

• Investors seeking predictable returns

  
  

Final Thoughts

Understanding the type of offering is just as important as evaluating the business itself. Each structure comes with different expectations, risks, and potential rewards for both the investor and the founder.

If you’re a founder, choose the offering that aligns with your growth stage, capital needs, and willingness to share ownership.

If you’re an investor, make sure you understand what you're getting in return—and when you might see it.