The biggest difference is the risk & reward. Debt is slightly less risky for investors, but there is also much less upside. Equity is riskier, but potentially much more lucrative.
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Debt. Investors lend the company money today in exchange for more money tomorrow. Investors are not shareholders, although they do have a right to company assets if the company goes under. We currently support Revenue Share contracts.
- Equity. Investors buy shares or units in the company in exchange for ownership. Investors earn a return if the company is acquired, goes public on the stock market, or pays dividends. We offer two template equity contracts, a SAFE and a Convertible note. There are other ways to structure an equity deal; if the SAFE doesn't fit your needs, your lawyer can draft a custom contract for you.
While there are exceptions, we've seen equity offerings perform better on Wefunder. About 90% of our investments are in equity agreements.