They generally require a deliverable, though. If the product is successful, backers get some form of tangible benefit. I don't see why this can't be some share

They generally require a deliverable, though. If the product is successful, backers get some form of tangible benefit. I don't see why this can't be some share of the company. Giving away 10% for a huge chunk of seed money ($2.4m in this case) is actually way better than you'll ever do from angel investors or any kind of incubator. So if the product is successful, throw a unit at a backer as well as a tiny percentage of the company. Just so they can not feel cheated when you sell for a multi-billion dollar exit that is not in the interest of your backers, because in that case they all get their money back. You don't have to say "your backing guarantees you X% of the company", you just say "in addition to receiving a VR, you will also receive an X% stake in the company if we are successful." The SEC can get involved precisely now, not when the funding happens, but rather when the options are given out.