Step 6 – What is equity Crowdfunding at in 2019

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The startups that raise on Republic set the terms at which they sell their securities.

You’ve probably heard the term “crowdfunding” before: perhaps in the context of a Kickstarter campaign or a GoFundMe page. It’s basically a financing model that collects small sums of money from a large number of people — i.e. the crowd — over the internet.
Equity crowdfunding uses that same basic model, but it's appropriate for startups, rather than causes and creative projects, and in return the backer gets a percentage of ownership or a financial stake in the company.*

* – On Republic, they typically get the Crowd SAFE.

How is equity crowdfunding different from other types of crowdfunding?

There are essentially three kinds of crowdfunding: reward-based, donation-based and equity-based.

1 Reward-based crowdfunding 
Is when you contribute money and get a reward in return. This is mostly used for creative campaigns, and there are often varying levels of rewards, or perks, that correspond to pledge amounts. Think Kickstarter and Indiegogo.

2 Donation-based crowdfunding
Is when you contribute money without expecting anything of value in return. This exists largely to fund charitable causes, like building a well in Kenya, or personal campaigns, like helping someone pay their medical bills. Think GoFundMe, YouCaring and CrowdRise.

3 Equity-based crowdfunding
Is when you contribute money to help fund the growth of a company, and receive a slice of the financial pie in return (but you can get perks too). These campaigns tend to yield much larger funding amounts. Think AngelList, FundersClub and yours truly, Republic.

What is Title III and why is it a big deal?

Equity investing isn’t new, but in the past only “accredited investors,” or wealthy people who earn more than $200,000 a year or have a net worth of over $1 million, were allowed to take part. In theory, this was to protect the non-wealthy from bad decisions and financial ruin, but the flip side was that ordinary citizens were denied the opportunity to invest as they saw fit. For example, AngelList, the world's most popular online investing platform, only allows accredited investors to invest.
That all changed in May 2016, when the SEC launched the new rules under the name “Title III” (full name Title III of the Jumpstart Our Business Startups Act, also called Regulation Crowdfunding or Reg CF for short).
President Obama’s words after he signed the bipartisan act, designed to make it easier for small companies to fundraise:

“For the first time, ordinary Americans will be able to go online and invest in entrepreneurs that they believe in. — Barack Obama”

The rules stated that 1) entrepreneurs can now raise up to $1 million in a 12-month period from non-accredited investors, and 2) investors can invest a limited amount per 12-month period based on their income and net worth.
It might sound a bit dry, but this is big. We're talking democratization-of-finance big. It means potentially opening up to the masses opportunities once reserved for the rich. It means a level playing field, where citizens interested in investing are no longer treated differently based on the amount of money that they have.

Why we’re excited

Because more investors mean more startups, and more startups means more social innovation and progress. This is what it looks like to fund the future.
That’s why Republic is focused specifically on Title III equity crowdfunding. Read more about our mission here.

Why you should be excited

Well, we think you should be. To help you decide if startup investing is for you, see: how do I start investing in startups.
Even if you’re not ready to invest right now, join Republic — we’re a community of tens of thousands of people interested in startups and investing.

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Published by Kyle

My name is Kyle and I am living the American Dream Financially Independent . I am a Financial Blogger at, Entrepreneur, Serial Angel Investor, Angels & Entrepreneurs Network, ATFS Certified Tree Farmer, and 2021 Arkansas Century Farm.

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