Most people are pretty confused about what crowdfunding is and is not. Here are the ten key concepts entrepreneurs and investors need to understand.
1. Product crowdfunding and equity crowdfunding are really different.
Most people still confuse them. Product crowdfunding is done on sites like Kickstarter and Indiegogo. It allows you to finance innovation directly, at the product level; contributors pre-purchase products or simply donate. Conversely, with equity crowdfunding investors take stock ownership in the company making the product, which is very different and quite a bit more complicated. Equity crowdfunding is not yet fully democratized for ordinary investors, but sites like AngelList and WeFunder allow larger (accredited) investors to do it.
