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How to Use Equity Crowdfunding for Your Startup

Tap each step to see how equity crowdfunding works for early-stage startups.

  1. What equity crowdfunding is

    Equity crowdfunding lets a startup raise money from a large number of small individual investors through an online platform, giving each of them real shares in the company in exchange for their investment.

  2. How it differs from reward-based crowdfunding

    Reward-based crowdfunding pre-sells a product to backers, while equity crowdfunding issues actual company shares to investors, which makes it a securities transaction with a different legal framework and set of investor protections.

  3. Annual fundraising limits

    Most countries cap how much a company can raise through equity crowdfunding in a 12-month period, so check the current limit under your local securities regulations before setting a fundraising target.

  4. Running an investor campaign

    A typical campaign involves publishing a company profile, setting a funding goal and deadline, and then collecting commitments from investors during the open subscription window.

  5. Managing things after a successful raise

    Once you hit your goal, funds are disbursed and you'll suddenly have many small shareholders β€” set up a shareholder registry and a simple communication channel for updates before the raise even closes.

Crowdfunding as a fundraising channel, not just marketing

Beyond traditional routes like institutional or angel investment, equity crowdfunding lets startups raise early capital directly from a large pool of small investors through an online platform. A well-run campaign also doubles as marketing, putting your product in front of potential customers while you raise money.

Confirm your business is properly registered first

Running an equity crowdfunding campaign generally requires the company to meet basic business or corporate registration requirements in its jurisdiction. Confirm your entity is properly registered and structured before committing time to a campaign, since platforms will verify this during onboarding.

Frequently Asked Questions

Can any startup run an equity crowdfunding campaign?

No β€” companies typically need to meet requirements around operating history and fundraising limits set by local securities law, and platforms often run their own additional screening, so check the specific conditions before applying.

What happens if a campaign doesn't reach its goal?

Most platforms use an all-or-nothing model, where funds are only released if the goal is met. If a campaign falls short, committed funds are typically returned to investors and the company doesn't receive any money.