Equity-based Crowdfunding generally occurs whenequity-based crowdfunding an investor receives an ownership interest in the company in exchange for his or her investment.

Equity = Owner

The investor becomes a shareholder in the company. Depending upon the type of shares/ownership interest the investor may be able to vote on strategic decisions. In most instances, the investor has the ability to sell his or her share, all or part of it, in the future at market value.  Furthermore, the investments are at risk as with any other investment.  Note that the level of investment allowed for accredited and non-accredited investors differs. See accredited and non-accredited investor.

Other Alternatives

However, there are other forms of equity crowdfunding. In lieu of ownership stake, a business may promise a share of future revenues. Businesses may also offer debt instruments.

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