Kickstarter and equity crowdfunding are two different ways to raise money for a project or venture. Kickstarter is a platform where people can donate money to projects in exchange for rewards, such as early access to the product or a copy of the finished product. Equity crowdfunding, on the other hand, allows people to invest in a company or project in exchange for a percentage of ownership in that company or project and has raised over a billion since it was introduced. But what are their differences and similarities, and how do you ensure your crowdfunding platform is compliant?
A Unique Way to Raise Money: Kickstarter Vs. Equity Crowdfunding
Kickstarter is a crowdfunding platform that allows people to donate money to projects in exchange for rewards. The project creator sets a fundraising goal and a deadline, and if the goal is reached, the project receives the funding. Rewards can be anything from early access to the product or a copy of the finished product. Kickstarter is an all-or-nothing platform, meaning that if the project doesn’t reach its fundraising goal, the project creator doesn’t receive any of the money.
On the other hand, equity crowdfunding is a way for people to invest in a company or project in exchange for a percentage of ownership in that company. Equity crowdfunding is different from Kickstarter in a few ways. First, with equity crowdfunding, investors are actually investing in the company, rather than just donating money. Second, equity crowdfunding is not an all-or-nothing platform. Even if a company or project doesn’t reach its fundraising goal, the issuer still receives the money that was raised.
If you are trying to choose between the two platforms, it is crucial to consider your goals. If you are looking for a way to raise an amount of money quickly without giving up a percentage of your company, Kickstarter may be the better option. This is because of the all-or-nothing nature of Kickstarter, which means that you either reach your fundraising goal and receive the money, or you don’t receive any money and do not need to pay a fee.
However, if you are looking to raise millions of dollars while gaining not only investors but brand ambassadors, equity crowdfunding may be the better option. This is because, with equity crowdfunding, people are actually investing in your company and will want to see it succeed. Additionally, even if you don’t reach your fundraising goal, you will still receive the money that was raised, which can be used to continue growing your company.
Ensuring Your Crowdfunding Platform Is Compliant
If you are using a crowdfunding platform, it is important to ensure that the platform is compliant with securities laws, especially when it comes to equity crowdfunding. This means that the platform follows all the rules and regulations set by the government. To ensure the equity crowdfunding platform you use is compliant you to consider:
- Does the company actually exist?
- Has the SEC approved these securities?
- Have they been filed with the board of directors?
Knowing who and who is not doing this is often difficult to determine from the outside. If you are an investor, you look at the actual filing from the company to understand what the company has filed for and its ongoing obligations.
If you are looking for a quick way to raise money without giving up equity in your company, Kickstarter may be the better option. However, if you are looking to raise money and gain investors, equity crowdfunding may be the better option. Additionally, it is important to ensure that the platform you are using is compliant with all the rules and regulations set by the government, whether you are raising capital or you are an investor.