Brian Nichols is the co-founder of Angel Squad, a community where you’ll learn how to angel invest and get a chance to invest as little as $1k into Hustle Fund's top performing early-stage startups.

Equity crowdfunding sounds like a dream.

Instead of pitching 50 VCs who all say no, you pitch directly to thousands of people who believe in your vision. You build community. You get customers who are also investors. You democratize startup investing.

The pitch is compelling. The reality is more complicated.

The Basic Math (Spoiler: It's Harder Than You Think)

Most founders don't realize equity crowdfunding is really, really hard.

The average check size on crowdfunding campaigns is about $1,500. So if you're trying to raise $500K, you need roughly 333 investors to hit your goal. That's not 333 people who see your campaign. That's 333 people who actually wire money.

For context, the typical conversion rate on crowdfunding campaigns hovers around 2-4%. So to get 333 investors, you probably need 10,000-15,000 people to even look at your campaign.

Most founders think they'll just put their campaign on Wefunder and people will magically show up. They won't. You need to bring your own audience, or you need to spend money to acquire one.

And that costs money. Real money. I've seen founders spend $50K-$100K on Facebook ads and influencer partnerships just to drive traffic to their crowdfunding campaign. Sometimes it works. Often it doesn't.

The Platforms: Not All Created Equal

The big players are Republic, Wefunder, StartEngine, and SeedInvest. Each has different fee structures, different audiences, and different success rates.

Republic tends to attract more crypto and tech companies. Wefunder skews toward consumer products. StartEngine is friendly to CPG and retail concepts. SeedInvest (now part of Republic) positions itself as more premium with higher minimums.

The fees range from 5-7% of the total raise, plus payment processing fees. Some platforms also take equity warrants or charge annual fees. Do the math before you commit. If you're raising $500K and the platform takes 7%, plus another 3% in payment processing, you're actually only netting $450K.

Success rates vary wildly by platform. The companies that succeed on equity crowdfunding platforms often already have traction elsewhere. They're not starting from zero. They've already raised money from angels or pre-seed VCs. They have revenue. They have users.

The platform didn't make them successful. They used the platform because they were already on a good trajectory.

Your Cap Table is About to Get Messy

Let's say you successfully raise $500K from 300 investors on Wefunder. Congrats!

Now you have 300 people on your cap table. Actually, they're probably in an SPV (special purpose vehicle), so technically you have one entity representing 300 people. But still.

When you go to raise your next round from a real VC, they're going to see that SPV and ask questions. Lots of questions.

"Who are these people? How much do they own? What rights do they have? Can they block a future sale? Are they going to freak out on Twitter when things get hard?"

Some VCs just won't touch companies that have done equity crowdfunding. They think it signals that you couldn't raise money the traditional way. They worry about the complexity. They don't want to deal with a crowd of non-professional investors who might not understand how startups work.

Now, not all VCs think this way. Plenty of successful companies have combined crowdfunding with traditional VC money. But you need to go in knowing that you're potentially making your life harder for future fundraising.

The Valuation Trap

Average valuations in equity crowdfunding have been climbing steadily. While VC valuations have stabilized or dropped since 2021, crowdfunding valuations kept going up.

Why? Because retail investors don't have the same benchmarks as VCs. They're investing with their hearts as much as their heads. They're excited about your product. They want to be part of the journey.

VCs, on the other hand, are doing comp analyses. They're looking at revenue multiples by industry. They're pressure-testing your unit economics. They're not buying the dream. They're buying the numbers.

So you might successfully raise at a $10M valuation on Wefunder. Then you go to raise a Series A, and VCs tell you the company is worth $6M. Now you're staring at a down round. And down rounds, even though they're less stigmatized than they used to be, still suck.

I'm not saying you should take a low valuation on your crowdfunding round. I'm saying you should be realistic about what the market will actually support when you go to raise from professionals.

What Actually Works

Okay, enough doom and gloom. Let's talk about when equity crowdfunding makes sense.

It works best in these situations.

You have a consumer product with a passionate fan base. If you're building something people love and want to support, crowdfunding can be powerful. Think food brands, beverage companies, or products with a strong mission.

You can leverage your crowdfunding investors as customers and advocates. The best crowdfunding campaigns turn investors into marketers. They buy your product. They tell their friends. They post about you on social media. That's the real value.

You've already raised some money from angels or early VCs. Running a crowdfunding campaign with zero outside validation is tough. But if you can say "we've already raised $250K from experienced investors, and now we're opening it up to the community," that's a much stronger story.

You're using it as a marketing exercise, not just fundraising. Some companies run crowdfunding campaigns primarily for the exposure. The money is secondary. If that's your strategy, cool. Just be clear about it.

You're not planning to raise traditional VC money later. If your path to success is bootstrapping or staying small and profitable, crowdfunding can be great. The cap table complexity doesn't matter as much if you're not trying to raise a Series A.

The Hidden Costs Nobody Talks About

Beyond platform fees and ad spend, there are other costs worth considering.

Time. Running a successful crowdfunding campaign is basically a full-time job for 2-3 months. You're creating content, responding to questions, doing outreach, updating backers. If you're the founder, that's time you're not spending building your product or talking to customers.

Legal fees. Reg CF filings require legal work. Budget $10K-$20K minimum for lawyers to help you navigate the securities regulations.

Ongoing investor relations. After the campaign, you have hundreds of investors who expect updates. Some platforms require quarterly updates. Some investors will email you constantly. You need a system to manage this.

The emotional toll. If your campaign flops, it's very public. Everyone can see that you didn't hit your goal. That's demoralizing for you and your team.

The Alternative Path

What we see working really well at Hustle Fund is raising your first $100K-$250K from angels and micro VCs who understand your space. Use that money to hit some early traction. Then, if crowdfunding still makes sense, you do it from a position of strength.

Eric Bahn, co-founder and general partner at Hustle Fund, put it well when talking about fundraising strategy: "A great fundraising process is only 20% about pitching. The other 80% is all about organization." That applies to crowdfunding too. You need systems, you need audience, you need a plan.

Or skip crowdfunding entirely and focus on building a product people actually want to pay for. Revolutionary concept, I know.

The thing is, fundraising is not the goal. Building a great company is the goal. Fundraising is just a tool to get there.

If equity crowdfunding helps you build a better company, do it. If it's just because you're frustrated with VCs saying no, that's probably not a good enough reason.

Real Talk

I'm not anti-crowdfunding. I've seen it work. I've seen companies use it brilliantly to build community and raise capital at the same time.

But I've also seen way more companies waste months on failed campaigns, damage their reputation, and create cap table headaches that haunt them for years.

Before you launch, ask yourself these questions.

• Do I have an audience I can mobilize?
• Am I prepared to spend money on marketing?
• Do I understand the long-term cap table implications?
• Is this the best use of my time right now?

If you answered no to any of those questions, you might want to rethink your approach.

Where to Go From Here

If you're dead set on equity crowdfunding, take this advice.

First, build as much traction as you can before you launch. Revenue, users, partnerships, press. Whatever moves the needle for your business. The more proof points you have, the easier it is to raise money from anyone, including retail investors.

Second, bring your own audience. Don't rely on the platform to find investors for you. Build your email list. Grow your social following. Create content that demonstrates your expertise.

Third, have a plan for what happens after the campaign. Whether you hit your goal or not, you need to keep building. The fundraising is just one milestone, not the finish line.

And if you're looking for a smarter way to learn about fundraising, cap tables, and early-stage investing, Angel Squad brings together founders and investors who've actually done this. We share what works, what doesn't, and help you avoid the expensive mistakes we've seen hundreds of times. Because learning from other people's failures is way cheaper than creating your own.

The bottom line? Equity crowdfunding can work. But it's not easier than traditional fundraising. It's just different. Go in with your eyes open, a solid plan, and realistic expectations. That's how you actually win.