Equity Crowdfunding

P2P vs Equity Crowdfunding

11 May, 2015

   

Both peer-to-peer (P2P) marketplace and equity crowdfunding have some commonalities, using the “many to one” concept of connecting many investors to an investment, and vice versa. However, there are vast differences between the two:

PRODUCT STRUCTURE

P2P Marketplace:

Debt - in the form of a loan

Crowdfunding:

Equity- shares of the company

TENOR

P2P Marketplace:

Your choice. Usually between 6 to 48 months

Crowdfunding:

Long term. Shares in a start-up are typically illiquid and cannot be resold till market demand develops

RETURN

P2P Marketplace:

Regular returns in the form of interest along with principal repayment

Crowdfunding:

No regular returns as dividends. You get shares, the value of which depend on marketability and liquidity of the shares

SAFETY

P2P Marketplace:

P2P platforms carry out credit checks on borrowers and assign them ratings. You choose your desired risk level

Crowdfunding:

Due diligence is completely up to the investor and it is up to the the company to decide what information they provide

LEVEL OF RISK

P2P Marketplace:

Typically lower risk than equity crowdfunding

Crowdfunding:

Relatively high risk and low liquidity

WHERE DOES MY MONEY GO

P2P Marketplace:

All types of parties, individual and institutions that are seeking to consolidate debt, business expansion, fund expenses. Who you lend to is up to you

Crowdfunding:

Usually start-ups to fund an idea that they hope will be converted to a marketable business

CREDENTIRALS

P2P Marketplace:

P2P platforms analyse and verify credit union scores, assets, existing debt and income profiles

 

Crowdfunding:

Any company can seek funding. Usually no credentials provided outside of marketing materials and business plans

 
GET STARTED WITH P2P
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