The Founder Series: CF 101 — Part 1 — Crowdfunding: reward or equity?

By November 16, 2016Industry Insider

Crowdfooding is proud to feature a series written by our Founder, Alessio D’Antino, introducing the basics of crowdfunding. This five-part series will highlight the drivers behind the majors decisions to be made in planning your first crowdfunding campaign.

In part 1 of this series, we define the two major ways of crowdfunding: reward and equity based crowdfunding.

Think of it as a beehive. Each piece of the honeycomb is built upon the former backer, culminating in an impressive formation, all contributing to one cause.

There are fundamentally two types of crowdfunding: reward-based and equity-based

Reward Crowdfunding — raise funds from the general public in exchange for insider products or services. Backers are contributing to a cause they care about and often buying into a sense of prestige, becoming part of an inner circle who are granted access to the latest in developments and releases from the startup.

Benefits: create a very engaging relationship with current and prospective customers and receive feedback about products.

Smith & Sinclair —reward crowdfunded Cocktail Confectioners

Equity Crowdfunding — raise large funding amounts from business angels or institutional investors in exchange for shares of the startup. These individuals should have added value components to bring to the table, including industry experience and expertise as well as extensive networks which can all be used to open doors to increase company’s growth.

Benefits: raise funds to ramp up business growth and onboard new shareholders who can contribute to the success of the business.

The Pressery — equity crowdfunded Super Natural Goodness

So how does a team determine which of these methods to crowdfund their project? Covered in Part 2 of CF 101.

Check out Alessio’s medium account for more thoughts on food business and crowdfunding in London.

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