Equity Vs Rewards Crowdfunding – Which Is Better?
Many crowd funders like ONPASSIVE can host both rewards and equity campaigns, but there are some key differences between the two. In general, rewards crowdfunding is best for businesses with unique offerings, while equity crowdfunding is better for companies with exponential growth potential. The differences are more subtle, however. If you are unsure which model is right for your business, consider speaking with an accountant and CPA to help you decide which type of campaign is best.
Despite their similarities, there are notable differences between equity and rewards crowdfunding. While rewards crowdfunding is more common, equity crowdfunding has a higher risk of fraud and doubtful returns. In addition, rewards crowdfunding involves no legal complexities. Unlike rewards crowdfunding, investors are more likely to be involved in a social cause, giving them an active role in the company’s development. Moreover, it can help boost the economy by creating jobs.
As the name suggests, reward and equity crowdfunding involve giving up your profits. While rewards crowdfunding is more common, equity crowdfunding requires investors to give up their profits. However, it is not ideal for businesses that are just starting. Since companies must file annual reports, equity crowdfunding is more appropriate for companies that have been around for at least a year. Therefore, companies that have already proven themselves are more likely to attract more investors.
Whether you’re launching a new product or looking for capital for a startup, equity crowdfunding offers greater flexibility. A company seeking capital to expand its operations is the ideal candidate for equity crowdfunding. The majority of successful companies that use this approach have accumulated social proof and have built enough traction to raise much more than $50k. The main difference between rewards and equity crowdfunding is the level of risk involved. Furthermore, federal laws are still developing, so this method is still a new one to take.
While equity crowdfunding is more common than rewards crowdfunding, it is still relatively new and is not the best option for most businesses. Often, it is best suited for companies that have already built social proof and gained traction. Moreover, it is also an essential tool for social causes. It allows investors to engage in their favourite brands and causes actively, and rewards can even be more rewarding than traditional investments. If you have the means, go for it!
For many investors, the benefits of rewards crowdfunding are apparent. The risk factor is higher with rewards. There are risks involved, but the returns are typically higher. The downside is that the rewards can be less secure. Whether you’re investing in debt or equity, you’ll ultimately want to decide which one is best for your business. If you’re looking for financial security, you should choose the equity option.
For those looking for more significant returns, equity crowdfunding may be the way to go. These companies typically look for more than $50k, and they’ve developed social proof. However, as an equity campaign, investors receive a product or service in return for their investment. A rewards-based approach might be the most profitable option in exchange for their investment, but both have disadvantages. For example, equity crowdfunding may be a better option for businesses that are not ready to pay back the money they raise.
While rewards-based crowdfunding is more like buying stock in a company, it is often riskier. For instance, if you invest in an equity-based platform, you’ll benefit from being a part of the company. On the other hand, this type of crowdfunding requires companies to file annual reports with the Securities and Exchange Commission. For example, Oculus is a reward-based campaign.
On the other hand, Equity-based crowdfunding is better for companies that need more capital. As its name implies, the goal is to purchase stock in a company, and investors are investing in hopes of seeing the business succeed. Regulated crowdfunding companies must file annual reports with the SEC and are regulated by the Securities and Exchange Commission. So, which type of crowdfunding is best for your company? Let’s talk about the differences between rewards and equity-based campaigns.