What are the Different Types of Crowdfunding?
Crowdfunding has been around for a few years in the form of rewards based platforms like kickstarter and Indiegogo. So what is the difference between rewards based crowdfunding and equity crowdfunding?
In rewards based crowdfunding, you are really making a donation. While they promise you a reward, there is no legal commitment between the two parties. If they do not deliver, you have no recourse. It is all good faith and hope.
Equity crowdfunding on the other hand is a legal contract and a financial investment. Fundamentally similar to investing in the share market. It comes with significant checks and balances and there are rules governing what can and cannot be done.
You are either getting a share in a company or becoming a lender.
Rewards based crowdfunding is donations while equity crowdfunding is an investment.
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