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What's the difference between debt and equity?

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.

  • 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 have two template debt contracts: Simple Loan and Revenue Share.

  • 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. Some examples include Preferred Stock or LLC Ownership Interests.

While there are exceptions, we've seen equity offerings perform better on Wefunder.  About 90% of our investments are in equity agreements.  

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