A Review of the Major Crowdfunding (Non-Equity)
Non-equity crowdfunding provides no equity or ownership to those who donate.
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Updated November 2026. This was first published on 8 June 2020. The idea is the same. Any number below is what the original piece said then. It is not a new count.
Key takeaways
- Non-equity crowdfunding provides no equity or ownership to those who donate.
- Instead, it is based on offering some reward in exchange for a donation.
- Non-equity crowdfunding is a significant type of crowdfunding that includes much of what an average person thinks of when they hear this term.
Key Crowdfunding Platforms #
Non-equity crowdfunding provides no equity or ownership to those who donate. Instead, it is based on offering some reward in exchange for a donation. Non-equity crowdfunding is a significant type of crowdfunding that includes much of what an average person thinks of when they hear this term. Companies and businesses that produce goods in the form of tech gadgets and art are specifically drawn to the non-equity or rewards crowdfunding. In this type of crowdfunding, the backer receives products or work produced by the campaigner in exchange for their contribution.
Kickstarter and Indiegogo are two key rewards-based crowdfunding platforms. In the non-equity crowdfunding, the creator offers some tangible rewards to the backers in exchange for their support. Often this product may be what they intended to build, such as a gadget, a pair of shoes, a board game, a book, etc.
Kickstarter is more exclusive to who can campaign on their sites and mandates that you offer rewards. Both the reward-based platforms offer entrepreneurs, Small and Medium Business (SMBs), and startups to tap the public desire for getting in on with the next big thing. Also, both take about 8% of the fees, with 5% going to their platform, and about 3% goes to the payment processor. GoFundMe is another big platform in crowdfunding, where you can set up a campaign for your small business or startup. This platform is strongly identified with crowdfunding for medical expenses and emergencies, so a more commercial campaign might struggle to gain traction on GoFundMe. Patreon is a membership platform in the US, allowing creators and artists to earn a monthly income by providing exclusive rewards and perks to their patrons or subscribers.
There is a second type of non-equity crowdfunding as well, referred to as debt crowdfunding. The debt crowdfunding involves borrowing funds from a crowd of investors instead of a bank. Kiva U.S., Prosper, and LendingClub are a few leading debt crowdfunding sites.
Most startups will find the prospect of taking the debt to get funding less attractive compared to offering rewards or equity. The debit crowdfunding, also known as P2P (Peer-to-Peer) lending, is more akin to a loan than a rewards or equity crowdfunding campaign.
Most of the startup project creators thinking about crowdfunding are considering a rewards-based alternative. This kind of crowdfunding is based on getting financial support in exchange for some form of rewards. This way, their projects get funding, and the backers of it get rewards. Kickstarter and Indiegogo are the most popular platforms for non-equity or rewards-based crowdfunding.
Table:1** **Pros & Cons of non-equity or rewards-based crowdfunding.
Any project which can create exciting and valuable rewards will find its place in Non-Equity Crowdfunding. Note that creating the right rewards is a challenge, and not every project can do it, But, if you can, you should take advantage of this type of crowdfunding.
Crowdfunding for Equity #
The JOBS Act does not consider the crowdfunding based on non-equity as it does not involve securities and has no express or implied possibility of a return. Though this type of crowdfunding is not exempt under the JOBS Act, nonetheless, people are investing substantial amounts of money in unregulated, non-equity based crowdfunding offerings that have a similar risk of loss as crowdfunding securities without offering a financial return.
Successful crowdfunding platforms like Kickstarter and IndieGoGo help people raise money for a project or a cause by encouraging support from anyone from the most seasoned investor to your mom who is interested in this campaign. They can donate funds to your crowdfunding campaign, and typically you don’t have to pay the money back. But, to raise funds through crowdfunding for equity successfully, you have to be excellent at marketing and presenting your business or product in a way that resonates with people and spurs them to donate.
Reward-based crowdfunding allows you to accept donations from people who receive a token of appreciation in return. Platforms like Kickstarter or Indiegogo allow nonprofits, businesses, and people to set up their accounts for raising money. Though you’ll see a range of $5 to $500 or more for a business raising fund, the average donation is $88. But, unlike equity crowdfunding that gives crowdfunding investors equity in your company, you’ll retain full ownership, and don’t have to pay back the money you raise through this crowdfunding campaign.
Equity Crowdfunding Rules and Your Residence rules #
Securities and Exchange Commission (SEC) rules for Title III of the JOBS Act, the equity crowdfunding law that was signed in as a potentially game-changing bill into the law, where the equity crowdfunding was made available for startups and small companies.
Here are the rules for professionals who plan to use it to help their companies raise new capital.
The JOBS Act says a company can raise up to $1,000,000 with Title III equity crowdfunding. If a company wants to raise more, there is always equity crowdfunding’s prettier cousin, a Regulation A+ mini-IPO to consider.
(a) the greater of $2,000 or 5 percent of the lesser of their annual income or net worth, if either the annual income or the net worth of the investor is less than $100,000.
(b) 10 percent of the lesser of their annual income or net worth, if both the annual income and net worth of the investor is equal to or more than $100,000.
In both cases, Investors may not invest more than an aggregate amount of $100,000 in a year.
Like many rewards-based crowdfunding campaigns and Regulation A+ mini-IPOs, if a company using the new equity crowdfunding law does not raise the full amount of their funding goal, they do not get to keep any of the money raised and lose the up-front out-of-pocket costs.
The proposed requirement of a full financial audit has been dropped by the SEC for companies using the equity crowdfunding law for the first time.
A company is required to disclose to investors, and file with the SEC, mention the price of the securities, the target offering amount, the method to determine the price, the deadline to reach the target, and whether they will accept investments over the target. They must describe the business, the company’s financial condition, the use of proceeds from the offering, information about the officers, directors, and owners of 20 percent or more of the company and their annual financial statements.
Equity crowdfunding involves the sale of securities based on federal and state laws. So, if you do something wrong, your company (its directors and officers), can be sued, and in some cases, could go to jail.0.
Much like most shares sold through private placements, in most circumstances, the shares of stock sold in equity crowdfunding cannot be sold for at least one year.
Questions and answers #
What is the main point? #
Non-equity crowdfunding provides no equity or ownership to those who donate.
What else did the original piece say? #
Instead, it is based on offering some reward in exchange for a donation.