{"id":3700,"date":"2021-11-03T14:09:00","date_gmt":"2021-11-03T14:09:00","guid":{"rendered":"https:\/\/blog.ethis.co\/?p=3700"},"modified":"2022-11-15T04:18:09","modified_gmt":"2022-11-15T04:18:09","slug":"equity-vs-reward-crowdfunding-differences","status":"publish","type":"post","link":"https:\/\/ethis.co\/blog\/equity-vs-reward-crowdfunding-differences\/","title":{"rendered":"Equity vs Reward Crowdfunding &#8211; What are the Differences?"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_51_1 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\" role=\"button\"><label for=\"item-69d6b6489cd9e\" ><span class=\"\"><span style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input aria-label=\"Toggle\" aria-label=\"item-69d6b6489cd9e\"  type=\"checkbox\" id=\"item-69d6b6489cd9e\"><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><ul class='ez-toc-list-level-5'><li class='ez-toc-heading-level-5'><ul class='ez-toc-list-level-5'><li class='ez-toc-heading-level-5'><ul class='ez-toc-list-level-5'><li class='ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/ethis.co\/blog\/equity-vs-reward-crowdfunding-differences\/#Find_out_what_alternative_type_of_fundraising_may_be_suitable_for_your_business\" title=\"Find out what alternative type of fundraising may be suitable for your business\">Find out what alternative type of fundraising may be suitable for your business<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/ethis.co\/blog\/equity-vs-reward-crowdfunding-differences\/#What_is_crowdfunding\" title=\"What is crowdfunding?\">What is crowdfunding?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/ethis.co\/blog\/equity-vs-reward-crowdfunding-differences\/#Introducing_the_players\" title=\"Introducing the players\">Introducing the players<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/ethis.co\/blog\/equity-vs-reward-crowdfunding-differences\/#What_is_Equity_Crowdfunding\" title=\"What is Equity Crowdfunding?\">What is Equity Crowdfunding?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/ethis.co\/blog\/equity-vs-reward-crowdfunding-differences\/#What_is_Reward_Crowdfunding\" title=\"What is Reward Crowdfunding?\">What is Reward Crowdfunding?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/ethis.co\/blog\/equity-vs-reward-crowdfunding-differences\/#Equity_vs_Reward_crowdfunding\" title=\"Equity vs Reward crowdfunding\">Equity vs Reward crowdfunding<\/a><\/li><\/ul><\/nav><\/div>\n<h5><span class=\"ez-toc-section\" id=\"Find_out_what_alternative_type_of_fundraising_may_be_suitable_for_your_business\"><\/span><strong>Find out what alternative type of fundraising may be suitable for your business<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h5>\n\n\n\n<p>Equity vs reward crowdfunding are words you may have heard if you\u2019re familiar with business and investment terminologies. Perhaps<sub>, <\/sub>you may have even heard of these terms even if you\u2019ve never invested in a venture.&nbsp;<\/p>\n\n\n\n<p>Thanks to the rapidly changing business landscape, customer preferences have fluctuated, and the traditional models of business have transformed dramatically.&nbsp;<\/p>\n\n\n\n<p>In the midst of this crazy yet exciting whirlpool of change, new terms and catchphrases have popped up everywhere. While most people have caught up with them, you would probably still frown at a few unfamiliar terms and concepts here and there.&nbsp;<\/p>\n\n\n\n<p>In this article, we explain to you two fundamental methods of financing new businesses and start-ups of the modern digital era: equity crowdfunding and reward crowdfunding.<\/p>\n\n\n\n<h3><span class=\"ez-toc-section\" id=\"What_is_crowdfunding\"><\/span>What is crowdfunding?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><a href=\"https:\/\/ethis.co\/blog\/crowdfunding-grow-wealth\/\" title=\"Crowdfunding: A New Way to Grow Your Wealth\">Crowdfunding<\/a> is a new and exciting method of raising funds for early-stage businesses and ventures. Growing rapidly due to the wedlock between the power of the internet and the increasing trend of entrepreneurship, equity crowdfunding allows businesses to secure capital from anyone who is interested: namely, the public, angel investors, venture capitalists, etc.&nbsp;<\/p>\n\n\n\n<p>In this way, crowdfunding bypasses all the shortcomings of the traditional methods of fundraising \u2014 no longer do you have to rely solely upon your family and rich friends or be drowned in debts from bank loans to bring your business ideas into reality; you can simply pitch your case to the public seeking their investment.&nbsp;<\/p>\n\n\n\n<p>Usually, crowdfunding today involves an online <a href=\"https:\/\/ethis.co\/blog\/islamic-crowdfunding-platforms-malaysia\/\" title=\"Islamic Crowdfunding Platforms in Malaysia\">platform <\/a>that acts as a third party and facilitates communication and transactions between the investors and the businesses. Hence before we go to the differences between the two <a href=\"https:\/\/www.youtube.com\/watch?v=_xGH7KKiuS0\" target=\"_blank\" rel=\"noreferrer noopener\">types of crowdfunding<\/a>, we need to understand the key players of the process.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"536\" src=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis1-1024x536.png\" alt=\"Equity vs Reward Crowdfunding\" class=\"wp-image-3714\" srcset=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis1-1024x536.png 1024w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis1-300x157.png 300w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis1-768x402.png 768w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis1.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption><em><strong>The key element of crowdfunding is the crowd \u2014 basically, anyone who wants to invest<\/strong><\/em><\/figcaption><\/figure>\n\n\n\n<h3><span class=\"ez-toc-section\" id=\"Introducing_the_players\"><\/span>Introducing the players<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>There are three key players in crowdfunding:&nbsp;<\/p>\n\n\n\n<ol><li><strong>The Crowd:<\/strong> The crowd is the group of people who invest in different ventures and projects. They can consist of the general public, venture capitalists, angel investors, or big corporations seeking shares in other companies. The crowd uses the platform to access information about projects and to make investments in them.&nbsp;<\/li><\/ol>\n\n\n\n<ol start=\"2\"><li><strong>The Platform: <\/strong>This is usually an online platform (e.g. a website\/app) that facilitates communication and transaction between the crowd and the businesses seeking capital in exchange for a fee. Once individuals or businesses sign up their projects to be financed, the platform verifies the authenticity of the project and then puts up relevant information of the project to the public. The public can then make investments (via online payments) in their projects of choice.&nbsp;<\/li><\/ol>\n\n\n\n<ol start=\"3\"><li><strong>The Project: <\/strong>The project can be any business or even creative venture initiated by an individual or a start-up company. The project has a set target of funds it needs to raise in order to successfully move to its implementation.&nbsp;<\/li><\/ol>\n\n\n\n<h3><span class=\"ez-toc-section\" id=\"What_is_Equity_Crowdfunding\"><\/span>What is Equity Crowdfunding?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In <a href=\"https:\/\/ethis.co\/blog\/equity-crowdfunding\/\" title=\"Everything You Need To Know About Equity Crowdfunding\">Equity Crowdfunding <\/a><a href=\"https:\/\/ethis.co\/blog\/ecf-risks-opportunities\/\" title=\"ECF: A risk to be taken, or an opportunity to be missed?\">(ECF<\/a>), companies seek investments from the crowd (via the platform) in exchange for equity i.e. shares of ownership in the company.&nbsp;<\/p>\n\n\n\n<p>The crowd that invests in such a project gains a share in the company and earns a part of the company\u2019s profits and dividends as the company continues its operation.&nbsp;<\/p>\n\n\n\n<p>At the same time, the company benefits as it doesn\u2019t get itself drowned in debts at its start-up phase and the company owners gain funds that can potentially help the company grow in value.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"536\" src=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis-11-1024x536.png\" alt=\"Equity vs Reward Crowdfunding\" class=\"wp-image-3715\" srcset=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis-11-1024x536.png 1024w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis-11-300x157.png 300w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis-11-768x402.png 768w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis-11.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption><em><strong>With reward crowdfunding, companies reward the investor with a product or service<\/strong><\/em><\/figcaption><\/figure>\n\n\n\n<h3><span class=\"ez-toc-section\" id=\"What_is_Reward_Crowdfunding\"><\/span>What is Reward Crowdfunding?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Reward crowdfunding, also known as seed crowdfunding, is an alternative form of raising funds for small-business whereby entrepreneurs seek investments from individuals in return for a product or service.&nbsp;<\/p>\n\n\n\n<p>This allows businesses to transform a promising idea into a profitable reality without having to pay back a single penny. With reward crowdfunding, the project is featured on the platform and the crowd invests in it, but instead of getting a share\/equity in the company, they get a product or a service in return.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"536\" src=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis-31-1024x536.png\" alt=\"Equity vs Reward Crowdfunding\" class=\"wp-image-3716\" srcset=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis-31-1024x536.png 1024w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis-31-300x157.png 300w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis-31-768x402.png 768w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis-31.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption><em><strong>The type of crowdfunding you choose depends on what you want to get out of your investment<\/strong><\/em><\/figcaption><\/figure>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"Equity_vs_Reward_crowdfunding\"><\/span>Equity vs Reward crowdfunding<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>While both equity crowdfunding and reward crowdfunding involve raising funds from the crowd via the platform for a new project, the key difference between them is what the investment is exchanged for.&nbsp;<\/p>\n\n\n\n<p>In the case of equity crowdfunding, the crowd gains a share of the ownership of the company, whereas in reward crowdfunding the company gives a product or a service to the crowd. Essentially, reward crowdfunding involves the crowd getting a reward in the form of a product (hence named \u201creward\u201d) from the company, whereas in equity crowdfunding the crowd buys shares of the company. To know more about the benefits of reward crowdfunding, check out our article <a href=\"https:\/\/ethis.co\/blog\/rewards-based-crowdfunding\/\">here<\/a>.<\/p>\n\n\n\n<p>In summary, both equity crowdfunding and reward crowdfunding give new ventures the opportunity to raise funds for financing their projects. Individuals or companies seeking to raise funds should first seriously consider whether they can afford to lose parts of their ownership of the company in exchange for funds, and in the case where they don\u2019t want to lose ownership, they can explore alternative methods such as reward crowdfunding.&nbsp;<\/p>\n\n\n\n<p>Investors also need to reflect upon whether they want a share in the company to gain steady dividends in the long term or get a special product or service from the company. At the end of the day, each company and investor is uniquely positioned due to their circumstances, hence they will need to decide for themselves which path they wish to take.<\/p>\n\n\n\n<p>Read more about <a href=\"https:\/\/ethis.co\/blog\/islamic-p2p-crowdfunding-explained\/\" target=\"_blank\" rel=\"noreferrer noopener\">Islamic P2P Crowdfunding<\/a><\/p>\n<div class=\"rns\" data-title=\"Equity vs Reward Crowdfunding &#8211; What are the Differences?\" data-tags=\"\" data-categories=\"Crowdfunding\" data-comments=\"0\" data-date=\"1635948540000\" data-author=\"Mahmud Hussain\" data-single=\"\" data-url=\"https:\/\/ethis.co\/blog\/equity-vs-reward-crowdfunding-differences\/\"><\/div> <!-- Check out https:\/\/reactandshare.com -->","protected":false},"excerpt":{"rendered":"<p>Find out what alternative type of fundraising may be suitable for your business Equity vs reward crowdfunding are words you may have heard if you\u2019re &hellip; <span class=\"read-more-link\"><a class=\"read-more\" href=\"https:\/\/ethis.co\/blog\/equity-vs-reward-crowdfunding-differences\/\">Read More &rsaquo;<\/a><\/span><\/p>\n","protected":false},"author":66,"featured_media":3718,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":""},"categories":[7],"tags":[],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2021\/11\/Blog-Images-Ethis-21.png","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/pbDwgm-XG","_links":{"self":[{"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/posts\/3700"}],"collection":[{"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/users\/66"}],"replies":[{"embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/comments?post=3700"}],"version-history":[{"count":1,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/posts\/3700\/revisions"}],"predecessor-version":[{"id":6552,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/posts\/3700\/revisions\/6552"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/media\/3718"}],"wp:attachment":[{"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/media?parent=3700"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/categories?post=3700"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/tags?post=3700"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}