Top 7 Equity Crowdfunding Platforms For Businesses & Entrepreneurs
It takes money to make money. It doesn’t matter if you’re in the beginning stages of launching your business or you’ve been in the game awhile — capital is necessary to ensure the success of your business. Of course, there are loans, lines of credit, and other traditional types of funding available at your bank or through an online lender. But there’s another option that should be on your radar: crowdfunding.
If you’re only loosely familiar with the concept, you might think of GoFundMe’s brand of medical and charitable crowdfunding. You may also think of rewards-based crowdfunding platforms like Kickstarter and Patreon in which entrepreneurs and artists solicit funds from backers in exchange for a physical product or exclusive creative content.
What if I told you that there existed an entirely different form of crowdfunding — one in which entrepreneurs and startups receive funding from backers in exchange, not for gifts or products, but for an equity stake in the company? A crowdfunding campaign in which the backers are investors?
That’s what we’re here to talk about. In this article, we’re going to look at equity crowdfunding, what it is, and who could benefit from this type of funding. We’ll also offer our top recommendations for equity crowdfunding platforms.
Other Featured Options:
- SeedInvest: Best for startups with high growth potential
- MicroVentures: Best for businesses with a unique idea
Read more below to learn why we chose these options.
Table of Contents
- What Is An Equity Crowdfunding Platform?
- A Warning About Equity Crowdfunding Platforms
- Best Equity Crowdfunding Sites For Businesses & Entrepreneurs
- What You Should Look For In An Equity Crowdfunding Site
- FAQs About Equity Crowdfunding
- An Equity Crowdfunding Platform To Fit Your Needs: Final Thoughts
- In Summary: Best Equity Crowdfunding Sites For Businesses & Entrepreneurs
What Is An Equity Crowdfunding Platform?
Equity crowdfunding is a way to raise capital to start or grow your business. Investors invest money in a business in exchange for equity — typically in the form of shares in the company. So, an investor receives ownership in the company, and in return, the company receives the capital it needs to launch or expand.
This varies dramatically from rewards crowdfunding, which offers investors some sort of reward (i.e., a discounted or free product) in exchange for the investment. Aside from what the investor receives in exchange for their money, another primary difference between equity crowdfunding and rewards crowdfunding is how much money can be raised. Typically, equity-based crowdfunding is best for entrepreneurs and companies that need large amounts of capital to start or grow their businesses.
An equity crowdfunding platform is an online platform that allows you to pitch your business to potential investors. These platforms typically require a fee for the service but in exchange will allow you to post information about your business so you can connect with investors to meet your financial goals.
Equity-based crowdfunding got its start later than rewards crowdfunding because crowdfunding involving investments was, until relatively recently, illegal in the US. Enter the Jumpstart Our Business Startups Act, better known as the JOBS Act. Passed by Congress and signed into law by President Obama in 2012, the JOBS Act amended federal securities regulations to legalize equity crowdfunding. The reasoning was that allowing startups to publicly solicit investment via crowdfunding would help spur the economy in general and startup formation in particular.
In the business world, equity crowdfunding is new. In fact, the reality of equity crowdfunding hasn’t yet lived up to the loftier predictions of those who pushed its creation. Nonetheless, the fact remains that billions of dollars have been raised by startups and companies via equity crowdfunding. For the right kind of business, equity crowdfunding represents a prime opportunity.
If your company is still just getting off the ground, however, you might find that rewards crowdfunding is a better fit for your enterprise — investors tend to be less starry-eyed than the typical crowdfunding project backer. In this case, you might want to read our reviews of Kickstarter, Indiegogo, and Patreon. Bear in mind that in many cases, a successful rewards crowdfunding campaign can set you up for an equity crowdfunding campaign by showing proof of demand to potential investors.
Let’s take a look at the leading equity crowdfunding sites and what they have to offer growing businesses.
A Warning About Equity Crowdfunding Platforms
Let’s pump the brakes for a moment and go over the disclaimer on some of Merchant Maverick’s equity crowdfunding reviews:
Bear in mind that equity crowdfunding is a still-evolving field, with the full impact of the JOBS Act still being assessed. Equity crowdfunding is a more complex proposition than, say, rewards-based crowdfunding, as investing is much more substantially regulated. Consult an attorney if you have any legal questions regarding the process, SEC regulations, etc.
In short: Equity crowdfunding is legally complex. Be careful and don’t get into trouble!
Best Equity Crowdfunding Sites For Businesses & Entrepreneurs
If you’re looking for an alternative to traditional lending, look no further. If you want to raise large amounts of capital, consider equity crowdfunding. You can receive capital in exchange for a stake in your business — no loan payments, collateral, or credit scores required. Start your search with these top-ranked equity crowdfunding platforms.
1. Wefunder: Best For Regulation Crowdfunding
WeFunder is the most successful crowdfunding platform to use Title III equity crowdfunding or Regulation Crowdfunding. In simpler terms, this means you can solicit investment from anybody — both from accredited investors and those who are not accredited.
US corporations and LLCs can use Wefunder. Of the 174 companies funded successfully through Wefunder, the company states that “most are alumni of Y Combinator.” The rare startup with exponential growth potential stands a decent chance of finding funding through the platform. Other businesses may have a tougher time of it. Tech and food companies seem to comprise the majority of funded startups on Wefunder.
To use the platform, Wefunder requires a $195 one-time fee before you can start crowdfunding. Wefunder is an all-or-nothing crowdfunding site and will take 7% of what you earned as a platform fee if you hit your crowdfunding goal.
2. EquityNet: Best For Entrepreneurs & Small Private Businesses
EquityNet stands out because it doesn’t just serve high-tech or high-growth businesses. Instead, this company markets itself to a broad range of entrepreneurs and private businesses. EquityNet does not have a prescreening process, so your business can be on the platform quickly and easily.
EquityNet offers entrepreneurs and businesses alike the ability to use its equity crowdfunding platform. EquityNet’s equity campaigns operate under Title II rules, so you’ll be raising funds from accredited investors only. You’ll also get to keep everything you raise regardless of whether you hit your funding goal.
EquityNet operates on a subscription basis. While you can sign up with EquityNet and publish your business profile for free, a subscription is required to access fundraising documents, use EquityNet’s business planning tools, and take advantage of other services. One-time subscription fees range from $900 to $25,000.
3. Crowdfunder: Best For Tech & Finance Companies
Crowdfunder is an equity crowdfunding platform that is best for early-stage startups, as well as: established businesses that are raising seed, Series-A, and Series-B funding. While Crowdfunder accepts a variety of businesses across all categories, its current campaigns show a high number of businesses in the tech and finance industries.
Crowdfunder allows companies to raise money via Title II equity crowdfunding. This means your crowdfunding campaign can solicit investments from accredited investors only. An accredited investor is someone that has a net worth of $1 million after deducting their principal residence or a person that has made $200,000/year for the past three years.
To launch a Crowdfunder campaign, you must sign up for a subscription, which starts at $299/month. You must also submit a Term Sheet, an Executive Summary, and an Investor Pitch Deck. These documents are complex and are best completed by an attorney. Crowdfunder will then review your documentation and determine if your crowdfunding campaign will be accepted on its platform.
4. Fundable: Best For Flexible Crowdfunding Options
Fundable is a crowdfunding site that offers both rewards and equity crowdfunding campaigns (though not both simultaneously). For the purposes of this article, we’ll focus on its equity crowdfunding campaigns, though its rewards campaigns may be something to keep in mind for the future.
Fundable is a flexible crowdfunding platform in terms of campaign types you can launch through the site. It is important to note, however, that Fundable does pre-screen businesses before allowing them to begin fundraising, so make sure you have everything in order before you begin the process.
Fundable is another crowdfunding platform that doesn’t take a percentage of what you raise but rather charges a fee to launch a campaign. Fundable’s Standard package is priced at $179/month, or you can take advantage of the Premium package for a one-time cost of $2,499.
5. AngelList: Best For Crowdfunding With No Monthly Fees
AngelList is one of the leading equity crowdfunding platforms that doubles as a job board for job-seekers trying to find a position with a startup. AngelList distinguishes itself by being the rare crowdfunding platform that allows entrepreneurs/startups to raise money free of charge. All fees are paid by investors.
Anybody can sign up with AngelList and attempt to raise money from the accredited investors on the site. However, AngelList doesn’t quite provide the guidance that many other crowdfunding platforms give you. There’s relatively little information for startups as to how you launch your campaign, so be prepared to do some research. But the research may well be worth it, as AngelList has an excellent public reputation and is highly rated by those who have used the platform to conduct equity raises.
Companies using AngelList raise money through investment syndicates. Essentially, accredited investors give money to “angel” investors who then invest the pooled money into companies on the platform. You won’t have to pay a monthly charge or a cut of what you raise to AngelList. However, keep in mind that there are other charges associated with arranging an equity deal with investor syndicates on AngelList (think paperwork, legalities, etc.).
6. SeedInvest: Best For Startups With High Growth Potential
SeedInvest is an exclusive platform that offers Regulation Crowdfunding. By SeedInvest’s own estimation, only 1% of the companies who have applied to use the platform have been approved. This platform is only for startups with the highest growth potential, so be aware … and be prepared for an extensive vetting process. But if accepted, you have the ability to raise as much as $30 million.
Tech companies seem to dominate the list of offerings on SeedInvest’s site. I’ll note that while many crowdfunding sites refuse to have anything to do with cannabis-related companies, SeedInvest appears not to be one of them. “Green” startups, take note!
You have to pay to play with SeedInvest’s platform. The fee structure is a bit complicated, particularly when compared to other platforms on this list. But expect to pay a 7.5% fee charged on the total amount raised in the round, 5% warrant coverage or equity based on the total amount raised, and up to $10,000 for due diligence, escrow, marketing, and legal expense reimbursements.
7. MicroVentures: Best For Businesses With A Unique Idea
MicroVentures is another example of a Regulation Crowdfunding platform. According to MicroVentures, it mainly invests in industries including internet technology, media and entertainment, software, green technology, mobile, social, and gaming.
Per the company, “MicroVentures looks for businesses that have a unique idea or a new spin on an old technology.” MicroVentures also goes on to note that less than 5% of businesses that apply are added to the platform.
MicroVentures fees include a $99 application fee, a $250 due-diligence fee, and 5% of what you raise. MicroVentures is an all-or-nothing crowdfunding site. If you raise some money but fail to meet your funding goal by the time your campaign ends, you’ll get nothing.
What You Should Look For In An Equity Crowdfunding Site
Now you should have an idea about some of the big players in the equity crowdfunding space. But how do you decide which one of these — or maybe another platform entirely — is the right one for you? In order to narrow down your choices, keep note of the following factors you should look for in an equity crowdfunding site.
This doesn’t just mean looking for the site with the least-expensive fees. Sure, one site may have low fees, but does it attract the type of investors that are eager to work with companies like yours? On the other hand, one site may charge outrageous fees and provide a lot of “extras,” but will these be beneficial for your business and your fundraising goals?
When researching crowdfunding sites, take into account all fees, which may include a subscription fee, a percentage taken from raised funds, legal fees, and other associated costs. Then evaluate the needs of your business and what is offered on the platform. Ask yourself if you can afford the fees, and decide if the features offered are beneficial to your needs and worth the expense. If not, keep looking.
Some platforms specialize in working with businesses in the tech industry. Others are looking for businesses that have new and unique ideas. Some crowdfunding sites are extremely picky over the businesses added to their platforms and will only take those that show the most growth potential.
While there are plenty of crowdfunding sites that cater to a variety of different industries, consider sites that specialize in your specific industry. While not guaranteed, this can help improve your chances of reaching the right investors. For example, your tech startup may get lost among different businesses and industries on one platform but may stand out on a site that caters specifically to tech businesses.
Resources & Support
New to crowdfunding? Look for a crowdfunding site that’s easy to navigate, offers excellent customer support, and has a variety of resources to help increase your odds of a successful campaign. Some sites are designed for later-stage companies that have prior experience with crowdfunding. If you’re a newbie, avoid these sites and find one that’s beginner-friendly.
One last thing to note is that sometimes these resources may come at a cost. For example, you may be required to pay a subscription fee or upgrade your account to get personalized help, legal documents, and other resources and support.
All Or Nothing VS Flexible Funding
Some crowdfunding sites have an “all or nothing” policy. If you raise all of your funds, great — you’ve met your goal and can collect your funds. If you don’t reach your goal, though, you don’t get to keep funds, even if you fall just a little short.
If you have a set goal that you have to meet, these platforms will be fine for you. However, if you could use capital even if it falls a bit short of your goal, look for a site that has flexible funding options.
Meets Your Goals
Make sure that the platform you select allows you to raise the amount of capital needed to launch your business or take it to the next level. If you’re looking to raise $2 million, for example, a platform that only allows fundraisers up to $1 million isn’t the best choice.
FAQs About Equity Crowdfunding
An Equity Crowdfunding Platform To Fit Your Needs: Final Thoughts
Equity crowdfunding has only been around for a few years. Suffice to say, it is a work in progress. If you play your cards right, however, it might be just the thing to take your startup to the next level. If you’ve done your due diligence in preparing your offering and you possess the ability to excite investors, professional and amateur, then it’s certainly an avenue worth exploring.
In Summary: Best Equity Crowdfunding Sites For Businesses & Entrepreneurs
- Wefunder: Best for regulation crowdfunding
- EquityNet: Best for entrepreneurs & small private businesses
- Crowdfunder: Best for tech & finance companies
- Fundable: Best for flexible crowdfunding options
- AngelList: Best for crowdfunding with no monthly fees
- SeedInvest: Best for startups with high growth potential
- MicroVentures: Best for businesses with a unique idea