When most people think of raising capital for their business through crowdfunding, their mind usually goes to rewards-based crowdfunding on sites like Indiegogo and Kickstarter. While this is a very viable option for some people, it may not be for you. Another great option is equity crowdfunding. When considering this option, it is important to educate yourself on what exactly equity crowdfunding is, if it will satisfy the needs of your company and which platform is best for you. Use the guide below to determine if you should use equity crowdfunding.

What Is Equity Crowdfunding?

Equity crowdfunding is when investors receive equity in a company in exchange for capital, and potentially receive a return on their investment from the company’s profits. It differs from the type of crowdfunding found on platforms such as Kickstarter or Indiegogo, which allow entrepreneurs to keep full control over the company. With equity crowdfunding, owners may not be able to keep full control depending on whether it is debt lending (which gets paid off with interest) or strictly equity.

Is It Right For You?

With so many different choices at your fingertips, it can be difficult to know whether equity crowdfunding or another option is best for you and your company. If your company offers a product or service and you only need enough capital to secure the first round of manufacturing, you likely have a customer-funded business- the revenue earned from each round of sales could be enough to keep your startup afloat. If crowdfunding is still the route you want to go, rewards-based crowdfunding, rather than equity crowdfunding, is probably the best option for you.

However, if you are unable to achieve your revenue goals until you have more capital and are able to hit a larger scale of production, equity crowdfunding may be a more appropriate strategy to attain your goals. By bringing in experienced investors, you will likely have enough financial support to fund your startup, plus increasing the number of people invested in the success of your startup will give you more access to valuable tools and resources that will help you grow.

Which Equity Crowdfunding Platform Is Right For You?

There are several different options when it comes to hosting your equity crowdfunding campaign, but our top picks are StartEngine, BankRoll and Manhattan Street Capital. These platforms all specialize in Regulation A+ and provide amenities to both the investor and the entrepreneur. For example, BankRoll has strategic industry partners in design, marketing, technology and investor pitching, who are available to guide entrepreneurs and help them make their projects more attractive to investors, and more successful overall. Another example of an amenity offered by these platforms is Manhattan Street Capital’s Research Analyst Service, which provides research coverage for companies after their offering has been completed.

It is important that when deciding what route you’re going to take in order to bring capital to your company, you are well-educated on your different options. If you think equity crowdfunding may be for you, get started by looking into the three platforms mentioned above.

For more information on equity crowdfunding or traditional crowdfunding, check out our weekly podcast and blog, or contact us fore more information!