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Regulation Crowdfunding does not dictate what kind of security you sell — issuers raising under Section 4(a)(6) commonly offer common equity, preferred equity, SAFEs, convertible notes, revenue-share agreements, or straight debt, and all six are permissible under the same exemption. Part 227 governs how much you can raise, who you can sell to, what you must disclose, and when investors can transfer; the instrument itself is a corporate, tax, and cap-table decision made with counsel, not something the rules assign to you.
The confusion is understandable. A founder comparing Wefunder, StartEngine and Republic sees different instrument names on different campaign pages and assumes the platform imposes them. Platforms do offer standardized templates, and those templates shape what most campaigns on that platform look like — but the constraint is commercial, not regulatory. What Reg-CF actually imposes applies identically to every instrument: a rolling twelve-month aggregate cap under 17 CFR 227.100, Crowdfunding exemption and requirements, offering-statement disclosure under 17 CFR 227.201, Disclosure requirements, and a one-year transfer restriction under 17 CFR 227.501, Restrictions on resales.
What follows is the practical comparison: what each structure gives the investor, what it does to your cap table, what it costs you in disclosure work, and — the part most founders underweight — how much harder or easier it makes the campaign to actually market.
What the regulation constrains, and what it leaves open
Rule 100(a)(1) caps the aggregate amount sold in reliance on Section 4(a)(6) during the preceding twelve months at $5,000,000, inclusive of the securities offered in the current transaction. That figure is subject to periodic inflation adjustment by the Commission. Rule 100(a)(2) applies per-investor limits where the purchaser is not an accredited investor. Neither provision references instrument type.
Rule 201(m) is where instrument choice becomes a compliance obligation rather than a free choice. It requires a description of the issuer's ownership and capital structure, including "the terms of the securities being offered and each other class of security of the issuer," the number offered and outstanding, whether they carry voting rights and any limitations on those rights, how the terms may be modified, a summary of the differences between the offered class and every other class, and — the paragraph founders most often underestimate — how the rights of the offered securities "may be materially limited, diluted or qualified by the rights of any other class of security of the issuer."
The practical consequence: the more exotic your instrument and the more classes already sitting on your cap table, the longer and more technical your Form C disclosure becomes. That is a real cost, and it is paid in legal hours.
The six structures, compared
| Instrument | What the investor holds | Cap table impact at close | Typical fit | Disclosure complexity |
|---|---|---|---|---|
| Common equity | Shares, priced at a stated valuation | Immediate dilution | Operating companies with a defensible valuation | Moderate |
| Preferred equity | Shares with a liquidation preference and defined rights | Immediate dilution, new class created | Companies mirroring an institutional round | High |
| SAFE | A right to future equity on a trigger event | Deferred; converts later | Pre-revenue and early-stage issuers | Moderate |
| Convertible note | Debt that converts, usually with interest and a maturity date | Deferred; sits as a liability until conversion | Issuers bridging to a priced round | Moderate to high |
| Revenue-share agreement | A contractual claim on a percentage of revenue up to a cap | None — no equity issued | Revenue-generating businesses not chasing an exit | Moderate |
| Term debt | A note with fixed interest and a repayment schedule | None — no equity issued | Asset-backed or predictable-cash-flow issuers | Moderate |
Common equity
The most legible instrument to a retail investor: they buy shares, at a stated price, at a stated valuation. That legibility is its marketing advantage. Its disadvantage is that it forces you to publish a valuation, which becomes the single most scrutinized number in your campaign and the one most likely to draw skeptical commentary on the offering page. It also dilutes at close rather than later, and can add hundreds or thousands of holders of record.
Preferred equity
Preferred stock carries a liquidation preference and typically some combination of dividend, conversion and protective provisions. It is the structure most familiar to institutional investors and is sometimes used when a Reg-CF tranche runs alongside a priced round. The cost is disclosure: Rule 201(m)(1) requires a summary of the differences between the offered class and each other class, and preferred terms are precisely where those differences get complicated. Retail investors also read preference stacks poorly, which raises the explanatory burden on the campaign page.
SAFE
A Simple Agreement for Future Equity is not debt and not equity — it is a contractual right to receive shares on a future trigger, usually a priced financing, acquisition, or IPO. Republic's Crowd SAFE popularized a crowdfunding-adapted variant designed for a large number of small holders. SAFEs avoid a present valuation debate (a valuation cap is not a valuation), carry no maturity date, and defer dilution.
The corresponding risk, and one that belongs in your disclosure rather than buried in the subscription documents, is that a SAFE can remain outstanding indefinitely if the trigger event never occurs. Issuers typically address this directly in the offering materials; obscuring it tends to surface later as investor-relations damage.
Convertible note
A convertible note is debt with a conversion feature, an interest rate, and a maturity date. The maturity date is the meaningful difference from a SAFE: it creates a dated obligation, and a note that matures without a qualifying financing puts the issuer and hundreds of small noteholders into a negotiation. Some issuers prefer the note precisely because the interest and maturity read as investor-protective. Others avoid it for the same reason.
Revenue-share agreement
Revenue-share instruments pay investors a defined percentage of gross or net revenue until a total return multiple is reached. No equity is issued and the cap table is untouched. For a profitable small business — a brewery, a franchise operator, a consumer brand with steady sales — this is often a better match to the actual business than a startup-equity structure that presupposes an exit.
The marketing consideration is that revenue share attracts a different investor. Equity crowdfunding buyers are frequently motivated by upside and affinity; revenue-share buyers behave more like yield investors and scrutinize revenue history, seasonality, and the payment waterfall. The campaign content has to be built for that audience, not repurposed from an equity deck.
Term debt
Straight notes with fixed interest and a repayment schedule are the least common Reg-CF structure, because the investment thesis rests entirely on the issuer's ability to service the debt. Issuers using it typically have collateral or contracted cash flow to point at; without one of those, retail demand is thin.
The three consequences that outlive the choice
1. Every Reg-CF security is locked for a year
Rule 501(a) prohibits transfer of securities issued under Section 4(a)(6) during the one-year period beginning when the securities were issued, with four exceptions: transfers to the issuer, to an accredited investor, as part of a registered offering, or to a member of the purchaser's family (or in connection with death or divorce). This applies to a SAFE, a revenue-share note, and common stock alike. Choosing an instrument does not buy liquidity, and campaigns that imply otherwise create a problem for themselves. We covered the mechanics in what happens when Reg-CF investors want to sell.
2. Cap table administration is a function of instrument and vehicle, not headcount alone
Direct-holding structures put every investor on the register. Crowdfunding vehicles organized to rely on the Rule 3a-9 exclusion consolidate them into a single line — but the vehicle rules constrain what the underlying security can look like. If a clean cap table is a priority for a future institutional round, the vehicle question and the instrument question have to be answered together, not sequentially. Our breakdown of Reg-CF SPVs and Rule 3a-9 sets out the conditions.
3. The instrument sets your disclosure surface area
Rule 201(m)(1) requires you to explain how the rights of the offered security may be materially limited, diluted or qualified by every other class you have outstanding. An issuer with one class of common stock writes a short paragraph. An issuer with two preferred series, outstanding SAFEs at three different caps, and a convertible note writes several pages — and every one of those pages is a page an investor can misread.
Practitioner note: Decide the instrument before you build the campaign creative, not after. Ad copy, landing-page structure, and the investor FAQ all change materially between an equity raise and a revenue-share raise. Reworking creative mid-campaign is the most avoidable cost we see, and it usually surfaces two weeks after launch when conversion is already soft.
How the instrument changes the marketing job
Across 200+ campaigns supported spanning Reg-CF, Reg-D 506(c), Reg-A+ and tokenized securities offerings, on 23+ crowdfunding platforms and 25+ industries, the pattern is consistent: the instrument determines which objection dominates the funnel.
- Priced equity — the dominant objection is the valuation. Campaign content has to justify the number with comparables, traction, and unit economics, and the FAQ has to address it head-on rather than deflect.
- SAFE — the dominant objection is "when do I actually get shares?" Content has to explain trigger events plainly, in the offering materials and on the campaign page.
- Convertible note — the dominant question is what happens at maturity. Vague answers reduce conversion measurably.
- Revenue share — the dominant question is revenue durability. The campaign lives or dies on historical revenue presentation and the clarity of the payment waterfall.
Marketing does not resolve an instrument-fit problem. A revenue-share offering marketed with startup-equity creative underperforms not because the traffic is wrong but because the promise and the paper disagree. Growth Turbine has provided marketing support across more than $490M in aggregate issuer-reported totals, and the campaigns that convert are consistently the ones where the instrument, the story, and the investor being targeted are the same shape.
Frequently Asked Questions
Does Regulation Crowdfunding limit which types of securities an issuer can offer?
No. Part 227 does not restrict instrument type. Issuers offer common equity, preferred equity, SAFEs, convertible notes, revenue-share agreements and debt under the same Section 4(a)(6) exemption. The rules govern offering size, investor limits, disclosure and resale — not the form of the security. Instrument selection is a corporate and tax question to work through with counsel.
Can you offer a SAFE in a Reg-CF raise?
Yes. SAFEs are among the most common Reg-CF instruments, and crowdfunding-adapted variants exist specifically for offerings with a large number of small holders. A SAFE defers dilution and avoids publishing a present valuation, but it carries no maturity date, which means it can remain outstanding indefinitely if no trigger event occurs. That risk belongs in the offering disclosure.
What is the difference between a SAFE and a convertible note in a crowdfunding offering?
A convertible note is debt: it accrues interest and has a maturity date creating a dated obligation. A SAFE is neither debt nor equity — it is a contractual right to future shares with no interest and no maturity. Both defer the valuation decision, but only the note gives investors a fixed date on which something must happen.
Do revenue-share offerings dilute the cap table?
No. A revenue-share agreement is a contractual claim on a percentage of revenue up to a stated cap. No equity is issued and existing ownership percentages are unchanged. It is generally a closer match for revenue-generating businesses that are not pursuing an exit, though it attracts a yield-oriented investor who evaluates the offering on revenue history rather than growth narrative.
Are Reg-CF securities restricted regardless of the instrument?
Yes. Rule 501(a) restricts transfer of any security issued under Section 4(a)(6) for one year from issuance, subject to four exceptions — transfer to the issuer, to an accredited investor, as part of a registered offering, or to a family member or in connection with death or divorce. The restriction applies to SAFEs, notes, revenue-share agreements and stock equally.
How much can a company raise under Regulation Crowdfunding?
Rule 100(a)(1) caps the aggregate amount sold in reliance on Section 4(a)(6) at $5,000,000 during the twelve-month period preceding the offer or sale, including the securities offered in that transaction. The figure is subject to periodic inflation adjustment by the Commission. Per-investor limits apply separately where the purchaser is not accredited.
Building the campaign around the instrument
If you are running a Regulation Crowdfunding raise, the instrument decision should be settled with counsel before the creative brief is written, because it determines the audience, the objection set, and the content that has to exist on day one. Our Reg-CF campaign team builds investor acquisition around the paper you are actually issuing — and if you have not yet decided between exemptions, the equity crowdfunding practice covers the comparison work upstream of that.
To review your structure and the campaign implications, get in touch.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute legal, financial, or investment advice. Always consult with qualified legal counsel and financial advisors before launching a capital raise.
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