Equity-based Crowdfunding Equity-based crowdfunding is the most sophisticated way of raising capital for projects. It is very similar to the way enterprises issue shares. The cost of capital raised from equity-based crowdfunding could be recognized as a cost of capital raised from a new issue of shares. However, this formula assumes a constant growth rate in dividends that most startups and small enterprises do not have. Nevertheless, an offer in the crowdfunding campaign frequently includes, besides the shares in equity, defined shares in profits. Reward-based Crowdfunding Reward-based crowdfunding is very different from debt- or equity-based crowdfunding, as the investors receive a tangible asset in return. It is similar to pre-sales or provision of services. However, if we want take into account time and changes in value such as inflation, we should use discount methods, for instance the IRR method. Where: r: cost of capital D: dividend per share payable in one year P: present value of share F: cost of issuing and selling the new shares g: constant growth rate in dividends 60
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