Crowdfunding means raising money from many people through online platforms.
There are four types: reward-based (a product or perk), equity-based (shares in the company), lending-based (loans) and donation-based.
In the EU, equity and lending crowdfunding is governed by Regulation 2020/1503: campaigns of up to €5m over 12 months through a licensed platform, licensed in Spain by the CNMV.
Crowdfunding suits early-stage projects with a clear mass-market product.
Startups often struggle to find investment in the early stages.
One of the most modern and accessible ways to raise funds is crowdfunding platforms, which let you raise capital from many people interested in supporting new ideas.
Below: the types of crowdfunding, how a campaign works, what to prepare, how it is regulated in Spain and the EU, and the pros and cons for founders and investors.
What crowdfunding platforms are
Online services through which startups and other projects raise money from a broad audience.
The principle is simple: many people put small amounts into projects they like or believe in, and the startup gets the capital to launch or grow.
- Reward-based — backers receive a reward: a product, service or early access. Examples: Kickstarter, Indiegogo and Spain’s Verkami.
- Equity-based — investors acquire shares in the company and can expect dividends or gains if the business grows.
- Lending-based — investors lend to the startup, to be repaid with interest.
- Donation-based — no reward is expected.
How crowdfunding is regulated in Spain and the EU
The platform’s jurisdiction matters: it affects the terms for both the startup and investors.
US platforms are regulated by the SEC. In Europe there is a single regulation on crowdfunding service providers, Regulation (EU) 2020/1503, supervised by the European regulator ESMA and national authorities — in Spain, the CNMV.
The key points for founders and investors:
- It covers equity and lending crowdfunding. Reward and donation campaigns fall outside it.
- The cap is €5m. The Regulation does not apply to offers by one project exceeding €5m over 12 months (art. 1); larger amounts follow the general rules on offering securities.
- The platform must be licensed. Check it in the CNMV or ESMA register before running a campaign.
- Protection for non-sophisticated investors. The platform tests their knowledge and ability to bear losses. If an investment exceeds €1,000 or 5% of the investor’s net worth, whichever is higher, they get a risk warning and must give explicit consent (art. 21). A non-sophisticated investor has 4 calendar days to change their mind without giving reasons (art. 22).
For a founder, equity crowdfunding is a full capital transaction: investors come into the SL as members or through a structure offered by the platform, which must fit the articles and the shareholders’ agreement.
How equity and loans are structured in Spain: How to structure startup investment in Spain.
How a campaign works
- Registration and project set-up. The founder registers on the platform and describes the project: goals, amount, timeline and terms.
- Review and moderation. The platform checks the project against its requirements and the law.
- Launch. Once approved, the project becomes available to investors.
- Receiving the funds. If the project reaches its target, the founder receives the money.
Working with platforms takes a lot of time. Listing a project on ten different platforms can take weeks or months, given their different requirements and moderation.
What to prepare
- A business plan with a clear development plan and return forecast. In effect, this is preparing the project for investment: a concept, a roadmap, a financial model and a commercial offer.
- Financial statements — transparency builds investor trust.
- Legal documents — incorporation documents, equity participation terms and whatever else the platform requires.
Money, investors and expectations
Fees. Platforms earn a commission on successful campaigns — a percentage of the amount raised plus payment fees — and some charge listing or extra service fees.
Tariffs vary, so compare them before choosing and include them in your calculation: the amount raised is not what lands in your account.
What investors get. Equity, loan interest or another reward.
Their rights and protections depend on the platform type and jurisdiction, so the terms and risks must be studied before investing.
Who invests. Usually individuals with average incomes who are willing to risk a small amount for potential gain or to support an interesting project.
Their motives vary: supporting innovation, making a return, being part of a project.
They usually have no professional financial training, so transparency and accessible information are decisive. Offer clear terms and explain the benefits plainly.
Promises. Make only realistic, achievable promises: inflated expectations disappoint investors and damage your reputation. Under-promise and over-deliver.
Emotion. In crowdfunding the emotional side is key: the startup’s story, the founder’s personal motivation and the campaign’s visuals create a response and a desire to support it.
Fraud. Fraudulent projects do appear on platforms. Warning signs: no transparent information, inflated promises, no legal documents.
Investors should check projects carefully; a licensed EU platform is an extra filter.
Pros and cons for founders
| Pros | Cons |
|---|---|
| A broad investor base — money from thousands of people instead of finding one or two large investors | Time and resources — materials, marketing, community engagement |
| Marketing effect — interest in the product before it reaches the market | Platform fees — make the money more expensive than it looks |
| Flexibility — often softer terms than funds or banks, without large debt or giving up a big stake | Heavy competition for investor attention on popular platforms |
| Low entry threshold — accessible even at the earliest stages | Many small participants — relationships to maintain and, in equity campaigns, a crowded cap table |
Pros and cons for investors
| Pros | Cons |
|---|---|
| Low entry threshold — you can invest a small amount | High risk — early-stage projects, a real chance of losing the money |
| Supporting new ideas — access to projects you would not otherwise find | Limited rights — less control than venture or strategic investors |
| High return potential — if the project succeeds, especially early on | No liquidity — hard to sell the stake if the project does not take off |
Crowdfunding versus other sources
Raising money through crowdfunding can cost more than traditional sources: fees, campaign marketing and the time it takes to prepare.
But compared with venture capital, where founders may give up a large stake or accept tough terms, crowdfunding offers more flexibility and control.
It is often combined with other sources — angel money and ENISA loans plus a campaign that also tests demand. An overview of investor types: How to find an investor for a startup.
Frequently asked questions
What types of crowdfunding are there?
Four: reward-based (a product or perk), equity-based (shares in the company), lending-based (a loan with interest) and donation-based. Startups mostly use the first three.
How is crowdfunding regulated in Spain?
Equity and lending crowdfunding fall under EU Regulation 2020/1503, with platforms licensed in Spain by the CNMV. The Regulation covers campaigns of up to €5m over 12 months; reward and donation campaigns are outside it.
How much can you raise through crowdfunding?
Through a licensed EU equity or lending platform, up to €5m over 12 months per project. The real amount depends on the project, audience and campaign quality.
What do platforms charge?
A commission on successful campaigns — a percentage of the amount raised plus payment fees — and sometimes listing or extra service fees. Tariffs differ, so compare them before choosing.
What protections does an investor have on a European platform?
A non-sophisticated investor takes a knowledge test, receives a risk warning when investing more than €1,000 or 5% of their net worth, and can withdraw within 4 calendar days without giving reasons.
Key points about crowdfunding
- Four types: reward, equity, lending, donation.
- In the EU, equity and lending crowdfunding follows Regulation 2020/1503 — up to €5m over 12 months, a licensed platform (the CNMV in Spain).
- You need a business plan, financial model, statements and legal documents.
- Fees and marketing make the money more expensive — count what actually reaches your account.
- Under-promise and over-deliver: crowdfunding investors are non-professionals, and transparency is everything.
Sources
- Regulation (EU) 2020/1503 on European crowdfunding service providers — arts. 1, 21, 22.
- CNMV — register of licensed platforms.
