Musings of an Intern
21/02/25
Two diff types of approaches A. product crowdfunding B. equity crowdfunding.
Product crowdfunding generally refers to money used for physical products. The funding is nondilutive because there is no equity involved and instead they are often preselling a product or collecting cash upfront. The campaign could either blast off and be successful, be unable to finish building the product so they raise more capital to complete the product or never ship/ partially fulfil the campaign.
Equity crowdfunding is when an investor gives money via an online funding platform in exchange for securities such as debt or equity -> gives you an ownership interest be it common or preferred stock, or convertible debt. While these might require an SEC registration there are ways to work around it. Lets say you want anybody to invest then they are limited to $1 million over 12 months and non accredited investors can only invest based on their net worth. (starts from as low as 2k$) However, if they only crowdfund from accredited investors (high net worth, vcs, etc) then they are legally bound by a number. Often however when money is raised through such crowdfunding approaches, common stock with little legal oversight powers are issued
Since in crowdfunding no one is obliged nor do they “care” too much about the company, if the company fails and requires new funding they may be left stranded unlike in a small investor pool where they will be backed by the angels/vcs. Or you can also find karens who care too much and will go out of the way to demand things from you.
Musings From The VCs 
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