What Is Equity Crowdfunding?

Equity crowdfunding is a way for startups and early-stage companies to raise capital by offering shares to the public—typically through online platforms. Unlike rewards-based crowdfunding (like Kickstarter or Indiegogo), equity crowdfunding gives investors a financial stake in the company.

In other words:

You’re not just donating to a project—you’re investing in a business and becoming a partial owner.

This model was made possible in the U.S. by the Jumpstart Our Business Startups (JOBS) Act, which opened the door for non-accredited investors to participate in private company fundraising.

How It Works

1. The Company Prepares a Campaign
   A startup creates a profile on a crowdfunding platform, outlining their business model, traction, financials, and how much capital they’re raising.

2. Investors Evaluate the Deal
   Anyone—accredited or not—can review the offering, ask questions, and decide whether to invest. Minimum investments can be as low as $100.

3. Investors Receive Equity
   In exchange for their investment, backers receive a slice of ownership, often in the form of common shares, SAFE notes, or convertible notes.

4. The Company Uses the Funds
   If the funding goal is met, the company receives the capital and moves forward with its business plans.

5. Investors Wait for a Return
   Unlike public stocks, equity crowdfunding investments are illiquid—meaning you won’t be able to sell your shares easily. Investors usually wait for a liquidity event, like an acquisition or IPO, to see returns.

   
   

Why It Matters

For Founders:

• Access to Capital without relying solely on VCs or banks

• Community Building with passionate supporters who become brand advocates

• Marketing Exposure through the visibility of the crowdfunding campaign

For Investors:

• Early Access to promising startups

• Portfolio Diversification outside of traditional assets

• Support Innovation by funding ideas you believe in

  
  

Is Equity Crowdfunding Regulated?

Yes. In the U.S., equity crowdfunding is regulated by the Securities and Exchange Commission (SEC) under:

• Regulation Crowdfunding (Reg CF) – Raise up to $5M per year from the general public

• Regulation A+ – Raise up to $75M with more rigorous disclosure requirements

• Regulation D (506(c)) – For accredited investors only

These rules help protect investors while giving startups more flexibility in how they raise capital.

Final Thoughts

Equity crowdfunding is democratizing access to early-stage investing—making it easier for startups to raise capital and for individuals to support innovation in meaningful ways.

Whether you're building the next breakout company or hoping to discover one, equity crowdfunding is a financial tool worth exploring.