Equity Crowdfunding and Share Types: Common vs. Preferred Stock

January 6, 2023

Common stock and preferred stock are both types of securities that represent an ownership interest in a company. However, they have some important differences that investors should understand.

Common stock is the most common type of stock and is owned by shareholders who have voting rights in the company. Shareholders of common stock are entitled to dividends, if the company declares them, and they have a claim on the company's assets and profits. However, common shareholders are at the bottom of the priority ladder when it comes to ownership structure. In the event that the company goes bankrupt and is liquidated, common shareholders will only receive their share after all debts and obligations have been paid.

Preferred stock, on the other hand, is a type of stock that has a higher claim on the company's assets and earnings than common stock. Preferred shareholders are entitled to receive dividends before common shareholders, and if the company goes bankrupt, preferred shareholders will be paid before common shareholders. Preferred stock may also have a fixed dividend, while the dividend for common stock can fluctuate.

One of the main differences between common stock and preferred stock is the voting rights. Common shareholders have the right to vote on the company's board of directors and on other important matters, while preferred shareholders do not have voting rights. This means that preferred shareholders have less control over the company's operations and decisions.

Another difference is the liquidity of the two types of stock. Common stock is typically more liquid, meaning it is easier to buy and sell, while preferred stock may be less liquid and harder to trade. This is because there is generally a larger market for common stock, as it is more widely held by individual investors.

Implications for Investors

There are also different tax implications for common and preferred stock. Dividends on common stock are taxed at the same rate as ordinary income, while dividends on preferred stock may be taxed at a lower rate. In addition, capital gains on the sale of common stock are taxed at a different rate than capital gains on the sale of preferred stock.

It is important for investors to understand the differences between common stock and preferred stock when deciding which type of stock to invest in. Common stock may offer more potential for growth, as shareholders have a claim on the company's profits and have voting rights. However, it also carries more risk, as the value of the stock can fluctuate greatly and there is no guarantee of a fixed dividend. Preferred stock may be a more stable investment, as it has a fixed dividend and a higher claim on the company's assets, but it may not offer as much potential for growth.

Which is better for the company to issue: common or preferred stock?

There is no one-size-fits-all answer to this question, as it depends on the specific circumstances of the company and the goals of the shareholders. Here are some factors that a company may consider when deciding whether to issue common or preferred stock:

Capital needs

A company may choose to issue preferred stock if it needs to raise a large amount of capital quickly, as it may be easier to sell a larger number of preferred shares than common shares. Preferred stock is also a good option if the company wants to avoid diluting the ownership stakes of existing shareholders.

Control 

Issuing preferred stock may be a better option if the company wants to retain control over its operations and decision-making. Common shareholders have voting rights, which can be used to elect the board of directors and influence other important matters. Preferred shareholders do not have voting rights, so issuing preferred stock would not dilute the control of the company's existing shareholders.

Risk and return 

The type of stock that a company issues may also depend on the level of risk and return that it is willing to accept. Common stock carries more risk, as the value of the stock can fluctuate significantly and there is no guarantee of a fixed dividend. However, it also offers the potential for greater returns, as shareholders have a claim on the company's profits and have voting rights. Preferred stock is generally a lower-risk investment, as it has a fixed dividend and a higher claim on the company's assets, but it may not offer as much potential for growth.

Market conditions 

The current market conditions may also play a role in the decision to issue common or preferred stock. For example, if the market is performing well and there is strong demand for stocks, a company may be able to issue common stock at a higher price and generate more capital.

The decision to issue common or preferred stock depends on a variety of factors, including the company's capital needs, the level of risk and return it is willing to accept, and the current market conditions. It is important for a company to carefully consider these factors and consult with financial advisors before making a decision.

In conclusion, common stock and preferred stock are both types of securities that represent an ownership interest in a company, but they have some significant differences. Common stock offers voting rights and the potential for growth, but also carries more risk. Preferred stock offers a fixed dividend and a higher claim on the company's assets, but may not offer as much potential for growth. 

*Note: this article was written by Chat GPT

Monogram Case Study - DealMaker (Embed)

When VCs said no, Monogram turned to retail investors. That decision powered their rise from startup to publicly traded company—and even helped them raise an additional $13M privately after their Nasdaq debut.

Monogram at NASDAQ celebration

The Challenge: Raising Capital on Their Terms

The Challenge: Raising on Their Terms

Monogram Technologies was founded with a bold vision: to revolutionize orthopedic surgery with a robotic joint replacement system using custom 3D-printed joints. The market for this technology is massive—approximately $19.6 billion, with over 1 million knee replacements per year. But it's a capital-intensive, regulation-heavy space—and traditional VCs weren't biting.

Instead of compromising, co-founders Dr. Doug Unis and Ben Sexson went all-in on a different path: retail capital. Why?

  • Control and ownership: Not only were they able to raise the capital they needed to grow the business—they did it on their own terms.
  • Long-term asset: They wanted to build an army of true believers who wanted to see the company succeed and would continue to reinvest over the years.
  • A value-add network: Raising from retail allowed Monogram to amass a waiting list of thousands of patients eager to participate in future trials.
  • Aligned incentives: Their mission to improve patient outcomes and build a better future for those struggling with joint pain resonated with retail investors.

The Power of Retail: Monogram's Capital Journey

Start Date End Date Type Platform Amount Raised # Investors
3/13/193/31/20A+SeedInvest$14,588,6686,000
11/16/201/16/21A+StartEngine$2,965,5018,000
1/17/212/18/22A+StartEngine$23,647,85314,082
7/15/223/16/23CFDealMaker$4,673,0002,249
3/1/234/8/23A+Republic$232,275120
3/1/235/23/23A+DealMaker$15,958,3645,198
5/18/23-Nasdaq listing
7/2410/24Unit OfferingDealMaker$12,990,1032,745

Monogram Capital Raise Timeline

Monogram's first direct-to-investor raise was a $14.6M round in 2019. Since then, Monogram has raised retail capital six additional times, using Reg A+ as a springboard to a Nasdaq listing in 2023.

Each raise brought in new believers—and more importantly, kept bringing them back. That's the long-term power of retail capital. It's not just one campaign—it's a compounding asset that grows with the business.

$80M+
Raised across seven campaigns
~40,000
Investors championing Monogram's vision
20%
Of each raise came from previous investors

Marketing Excellence

DealMaker Reach provided strategic investor acquisition services, helping Monogram connect with the right audience through high-impact channels.

Premium Publications

Targeted campaigns in premium publications like Morning Brew captured qualified investors

High-Engagement Webinars

Engaging events that generated over $4.3 million in investments

Community Building

Strategic approaches that fostered a loyal shareholder base

Investment Momentum

Innovative approaches that amplified investment momentum

Monogram's Journey to Success

Monogram's journey has been defined by relentless innovation, strategic fundraising, and breakthrough advancements in robotic-assisted joint replacement. From early-stage research to a Nasdaq listing and beyond, Monogram's milestones reflect its evolution into a pioneering force in orthopedic surgery:

  • Filed its first patent application in 2017
  • Conducted clinical studies at UCLA and University of Nebraska
  • Expanded the team with key hires
  • Attracted a top-tier advisory board to guide clinical innovations
  • Signed their first distribution partnerships
  • Made headlines with cutting-edge live demonstrations
  • Secured 501(k) FDA clearance for the mBôs surgical system

Nasdaq Debut & Beyond

In May 2023, Monogram Orthopaedics successfully listed on the Nasdaq—a significant milestone offering liquidity and growth opportunities for the company.

For most companies, that would be the end of their story in the private markets. But for Monogram, it was just the beginning of a new chapter.

Public perception says you can't raise privately post-IPO. Monogram proved that wrong.

Defying conventional fundraising norms, Monogram raised an additional $13 million from private investors, powered by DealMaker. This move highlighted the power of a dedicated investor community and provided additional strategic growth capital. Meanwhile, strategic digital marketing for the private offering helped boost the public share price—a win-win for the company and its investors, both public and private.

This was retail capital at its best: strategic, repeatable, and aligned.

One vision. Zero compromises.

This wasn't a one-time raise. It was a multi-year capital strategy.

Retail capital helped Monogram:

  • Go from concept to commercialization without relying on VCs
  • Retain ownership and control in a high-burn industry
  • Build a base of loyal shareholders who invested not once, but over and over again
  • Uplist to the Nasdaq, and still keep raising post-IPO

This is what makes retail capital different. It doesn't expire—it compounds. And DealMaker is built to maximize that long-term value.

Dr. Doug Unis Quote
Ben Sexson Quote

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