Here’s something pretty obvious: capital is crucial for startups. Perhaps something less obvious is exactly how your company should raise the capital.
Traditionally, when new businesses set out to source startup funds, you would do one of a few things: invest personal savings, raise funds from family and friends, or head to the bank and take out an institutional loan. If you were lucky enough, a business angel may be interested, in exchange for a large chunk of your company in return.
In 2021, things are different. Of course, these traditional options still exist, but so too does equity crowdfunding.
Equity crowdfunding is currently revolutionizing the fundraising process for startups, with $2.5 billion raised in equity crowdfunding, according to Fundly.
Differing from rewards-based crowdfunding, equity crowdfunding is a means for early-stage private companies to raise money from a large group of everyday people – in other words, the crowd. In return, these unaccredited investors are offered a small share in that company. If the company does well, they can profit; although they can equally lose what they invested if the company doesn’t succeed.
Equity crowdfunding is often arranged through platforms such as Wefunder, StartEngine, and Republic, which are all generating huge amounts for startups. In fact, in the United States, $214.9 million was raised by 1,035 new companies in 2020, with Crowdwise predicting that equity crowdfunding will surpass $300 million in 2021.
For a comprehensive overview of what equity crowdfunding is and how the regulatory landscape works, see our guide on Equity Crowdfunding: The Future of Financing. Below, we dive into the seven specific ways equity crowdfunding is changing the game for startups.
How Is Equity Crowdfunding Revolutionizing Fundraising for Startups?
Now we know what equity crowdfunding is, we can ask how exactly it is changing the game for startups and why it could be the right call for your company.
#1 – It Opens the Door to a Broader Audience of Investors
With equity crowdfunding, your success isn’t reliant on just a handful of people who may or may not believe in your vision. Instead of having to convince an angel or a bank manager, you passively pitch to millions of potential investors. In fact, Wefunder alone has accrued investments from 1.39 million investors in the nine years since 2012.
This opens the door to more people, who all have an active interest in investing in companies like yours. This gives your company and objectives a greater chance of resonating with the right people and raising the capital you require.
The scale of this investor pool is staggering compared to traditional fundraising. Rather than spending months networking to find a single angel investor, equity crowdfunding platforms give you instant access to hundreds of thousands – even millions – of people actively looking to invest. The key is understanding how to reach and convert these potential investors through targeted investor acquisition marketing.
Pro Tip: While equity crowdfunding platforms provide access to a massive investor pool, most successful campaigns generate the majority of their investments through external marketing – social media advertising, email campaigns, PR, and content marketing – not from organic platform traffic alone. Companies that pair their listing with a data-driven investor acquisition strategy consistently raise 3–5x more than those relying solely on platform traffic.
#2 – It Can Be an Incredible Catalyst for Business
By raising money through equity crowdfunding, you are also doing great things for your bottom line. Crowdfunding rounds are becoming key parts of marketing strategies, and are a powerful way for businesses to engage with customers, deepen customer relationships, and increase loyalty.
It makes sense. If an individual invests in your company, they will want it to succeed to see a return on their investment. This means that they are more likely to purchase from your company, refer your products and services, and share your story to others.
This “investor-as-customer” dynamic is one of the most underestimated advantages of equity crowdfunding. Every investor becomes an emotionally and financially invested brand ambassador. Companies that build a strong brand identity before launching their campaign can convert these investors into long-term customers at a much higher rate – turning a fundraise into a community-building exercise that drives revenue long after the campaign closes.
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Schedule a Free Consultation#3 – It Allows for Both Launching and Scaling
Equity crowdfunding may well be ideal for businesses who need capital to get off the ground, but it can also be used by more established startups as a fundraising method when the time comes to scale.
Changes to the Jumpstart Our Business Startups (JOBS) Act late last year saw the amount of money that can be raised through equity crowdfunding jump from $1 million to $5 million. This means that companies can now generate a considerable amount of capital, wherever they are on their journey of growth.
And the options don’t stop at $5 million. Companies looking to raise even more can explore Regulation A+ (up to $75 million) or Regulation D 506(c) (no upper limit, accredited investors only). Many successful companies use a stacked approach, combining multiple regulations to maximize their total raise. For a full comparison, see our guide on Reg CF vs Reg D vs Reg A+ vs Reg S.
#4 – It Allows You to Dictate the Terms...
One of the biggest draws to equity crowdfunding is that you as the entrepreneur have full control over the terms of investment, including your objectives, your company valuation, and how much capital you wish to raise.
Meanwhile, alongside the maximum fundraising target, this style of crowdfunding allows you to establish a minimum funding goal. So, even if you don’t achieve everything you want, you can still successfully raise capital.
This level of control is particularly valuable for founders who want to protect their cap table. Unlike traditional venture capital, where investors often demand specific board seats, veto rights, and liquidation preferences, equity crowdfunding lets you structure the deal on your own terms. Understanding your startup valuation and setting the right terms is critical to a successful campaign.
Pro Tip: Setting the right valuation is one of the most important decisions in your equity crowdfunding campaign. Overvalue your company and investors will pass; undervalue it and you’ll give away too much equity. Use our Startup Valuation Calculator and Pre/Post-Money Valuation Calculator to model different scenarios before launching your campaign.
#5 – ...And It Allows You to Retain Control
After dictating the terms of the fundraising, another draw to equity crowdfunding is that you will remain in control of your company.
This means that instead of having a business angel come in and take a large and potentially majority share of the company, you are assembling a larger group of investors making smaller contributions – 78% of investments are under $500, according to Wefunder. This means that nobody apart from you is going to end up with the majority of power.
This democratized ownership structure is one of the fundamental reasons equity crowdfunding has overtaken angel investing in annual funding volume. Founders keep control while still accessing the capital they need to grow. And because investors are spread across hundreds or thousands of individuals, no single investor has the leverage to force strategic decisions that don’t align with your vision.
#6 – It Allows You to Focus on Doing What You Do Best
By using an equity crowdfunding platform, you are promoting your business to a ready-made audience who are out to actively invest in startups like yours.
This convenience allows you to spend more time building your business, instead of figuring out how to pitch to your bank, business angels, or reluctant family members.
The plus side of this is that it requires no need for public speaking or presentations – great news for introverted entrepreneurs, who are able to simply create a business plan, upload it to the crowdfunding platform, set a desired financial goal, and then allow the people to decide if investing in the company is for them.
That said, while listing your campaign is simple, marketing your campaign is where the real work happens. The most successful equity crowdfunding campaigns invest significantly in performance marketing to drive qualified investors to their campaign page. This includes paid social media advertising, targeted email campaigns, PR outreach, and content marketing. Companies that work with a specialized investor acquisition agency can focus on building their product while the marketing drives investor traffic to their campaign.
#7 – It Provides a Means to Validate Your Plan and Make Important Changes
Market research is key to startups and equity crowdfunding is a new market research tool. By putting your business out to the masses early on, it offers a way to gain important feedback on your vision, product, and business plan.
After all, gathering an army of keen crowdsourced investors will be validation that your vision resonates with the right people. If you eventually do need to rely on the financial might of a business angel, this validation will be a useful thing to have.
Equally, if things aren’t going your way and your campaign is less successful than you had imagined, this feedback can be very helpful, allowing you to make adjustments to your business plan or product offering to improve your odds of success.
This validation function extends beyond just your business model – it also validates your brand positioning, pricing, and market messaging. The real-time feedback loop from hundreds of potential investors is invaluable market intelligence that would cost thousands of dollars to acquire through traditional market research methods.
Pro Tip: Treat your equity crowdfunding campaign as both a fundraise and a market validation exercise. The data you gather – which investor demographics convert, which marketing channels drive the most investment, which messaging resonates – becomes a powerful dataset for optimizing future raises and marketing efforts. Our case studies show how companies that analyze campaign data and iterate on their strategy consistently outperform on subsequent raises.
Choosing the Right Platform for Your Raise
With equity crowdfunding’s growing popularity, the number of platforms has expanded to more than 55 options. The three most recognized – Wefunder, Republic, and SeedInvest – each have distinct strengths:
- Wefunder: 1.39 million investors, lowest barriers to entry, 7.5% fee (waived with $25K+ angel investment)
- Republic: <3% acceptance rate but 90%+ funding success, 6% + 2% equity fee
- SeedInvest: Highest average raise per campaign ($435,780), built-in marketing support
- StartEngine: Large investor community, self-serve campaign tools
For a detailed comparison including additional platforms like Dalmore Group, DealMaker, and Issuance.com, see our comprehensive 6-platform comparison guide. If you’re raising specifically for real estate, see our top 10 real estate crowdfunding platforms comparison.
Pro Tip: Don’t limit yourself to a single platform or regulation. Many successful companies use a stacked approach – raising under Reg CF on Wefunder to build community, then adding a Reg D 506(c) campaign for accredited investors, and potentially a token sale for international reach. Talk to our team about building a multi-platform, multi-regulation strategy that maximizes your total raise.
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Whether you’re launching your first raise or scaling with a multi-regulation strategy, Growth Turbine builds custom investor acquisition campaigns that deliver results. With an 87% success rate across 200+ campaigns and $490M+ in capital raise assisted, we know what works.
Get Started TodayFrequently Asked Questions
What is equity crowdfunding and how does it work?
Equity crowdfunding is a method where early-stage private companies raise money from a large group of everyday people – the crowd. Investors contribute smaller sums (as low as $100) through online platforms like Wefunder, Republic, and StartEngine, receiving a small share in the company in return. If the company succeeds, investors profit; if it fails, they can lose their investment. According to Fundly, $2.5 billion has been raised through equity crowdfunding.
How much money can startups raise through equity crowdfunding?
Under Regulation CF, startups can raise up to $5 million in a 12-month period (increased from $1 million through changes to the JOBS Act). For larger raises, Reg A+ allows up to $75 million, and Reg D has no upper limit. In the US, $214.9 million was raised by 1,035 new companies in 2020.
How is equity crowdfunding different from rewards-based crowdfunding?
In rewards-based crowdfunding (like Kickstarter), backers receive a product or reward in exchange for their contribution. In equity crowdfunding, investors receive an actual ownership stake (equity) in the company. This means investors can profit if the company grows in value, but they also bear the risk of loss. Equity crowdfunding is regulated by the SEC under regulations like Reg CF, Reg A+, and Reg D.
What platforms are best for equity crowdfunding?
The top platforms include Wefunder (1.39 million investors, lowest barriers to entry), Republic (90%+ funding success rate, stricter vetting), SeedInvest ($435,780 average raise per campaign), and StartEngine. Each has different fee structures, acceptance rates, and strengths. See our Wefunder vs Republic vs SeedInvest comparison and expanded 6-platform guide for details.
Do I retain control of my company with equity crowdfunding?
Yes. One of the biggest advantages of equity crowdfunding is that founders retain control. Because investors make smaller contributions – 78% of investments on Wefunder are under $500 – no single investor ends up with a majority share. Unlike traditional angel investing, you dictate the terms of investment, including your objectives, company valuation, and how much capital to raise.
Can equity crowdfunding help market my business?
Absolutely. Crowdfunding rounds are becoming key parts of marketing strategies. Every investor becomes a customer and brand ambassador who is likely to purchase from your company, refer products and services, and share your story. Companies that build strong brand positioning before launching can convert investors into long-term customers at significantly higher rates.
What was the JOBS Act and why does it matter for crowdfunding?
The Jumpstart Our Business Startups (JOBS) Act introduced Regulation Crowdfunding (Reg CF), allowing everyday people – not just accredited investors – to invest in startups. Recent changes increased the fundraising limit from $1 million to $5 million, opening the door to companies at different stages of development. The JOBS Act fundamentally democratized startup investing.
How much was raised through equity crowdfunding in 2020?
In the United States, $214.9 million was raised by 1,035 new companies in 2020. Crowdwise predicted that equity crowdfunding would surpass $300 million in 2021. The total market has reached $2.5 billion according to Fundly. Wefunder alone has attracted 1.39 million investors since 2012, demonstrating the massive scale of the equity crowdfunding market.
Do I need a marketing strategy for my equity crowdfunding campaign?
Yes. The most successful campaigns generate the majority of investments through external performance marketing – social media advertising, email campaigns, PR, and content marketing – not from organic platform traffic alone. Working with a specialized investor acquisition agency can significantly increase capital raised while allowing you to focus on building your business.
Can I use equity crowdfunding to validate my business idea?
Equity crowdfunding is a powerful market research tool. Putting your business out to the masses provides real-time feedback on your vision, product, and business plan. A successful campaign validates that your idea resonates with investors. If the campaign underperforms, the feedback helps you make adjustments to your plan or product offering. This validation is also valuable if you later seek angel or venture capital investment.
