Crowdfunding

Raising money from many people. Four different things go by the name.

What it means

Rewards crowdfunding pre-sells a product. Equity crowdfunding sells shares. Debt or peer-to-peer lending borrows. Donation crowdfunding asks for nothing in return.

Why it matters

Rewards platforms are effectively pre-orders and validate demand as well as raising cash. Equity platforms are a real share issue with real shareholders and real obligations.

What it looks like in practice

Equity crowdfunding usually issues shares through a nominee, which keeps the cap table manageable. SEIS and EIS relief is often part of the offer and requires advance assurance.\n\nCampaigns succeed on the audience you bring, not the audience the platform has.

What to watch out for

Rewards campaigns that under-price fulfilment and shipping and lose money on every backer. And the ongoing investor communication obligations after an equity raise, which are real work.

Where to get proper advice

The FCA on regulated platforms. A corporate solicitor before any equity offer.