There are hardly
some folks who could start a business without any financial backing from
others. Unless you are from a wealthy family, you may roam around to find an
investor.
After wandering at
many banks or soul-crushing meetings, you have to be crippled by high-interest
rates. Thankfully, there is another way called crowdfunding.
Crowdfunding is a
process of involving investors and donors. It is one of the most exciting
developments of investment for expanding business. Here in this article,
everything you need to know about crowdfunding. Let’s get started!
What is Crowdfunding?
As the name
suggests, crowdfunding is a way of engaging the crowd to collect funds through
a complete approach. It’s a fundraising method that raises funds from a large
number of contributors.
The raised funds
are used for startups, business ventures, nonprofits, personal projects, etc.
It is prevalent among startups. Yet, the established inventors, musicians,
entrepreneurs, filmmakers, charities, etc. also opting for crowdfunding.
This idea has been
around since 2003 on the internet. Some people find it awkward to ask for money
from strangers. But, now there are a lot of trustable crowdfunding sites.
With a great
project on hand, you got a higher chance of getting help. Overall, it’s a great
way for creatives and entrepreneurs to get their idea into reality.
Crowdfunding: What Are The Types?
There are commonly
four types of crowdfunding campaigns available.
- Donation-Based Crowdfunding: The
investor pools their money to fund a charitable cause. You may or may not get
something in return. - Loan-Based Crowdfunding: An investor
lends money to individuals or companies. The investor expects a set interest
rate in return at pre-determined intervals. - Reward-Based Crowdfunding: An investor
gives money to the project or a company in return for a reward. The reward is
non-financial, and it can be any product from the company. - Equity-Based Crowdfunding: An investor
invests in the shares that are sold by any company. The investor gets a
profit-sharing from the company in the form of dividends.
How Does Crowdfunding Work?
Note that there
are three participants in crowdfunding. They are the investors who are
investing the money, an individual, or group who need funding and a crowdfunding
website that connect both.
From getting a
project to finding an investor, crowdfunding websites help you everywhere. Once
you decide on a plan, the business or individual may ask a few things. Such as,
how much fund is needed, what the fund will be used for, etc.
When you are sorted with the crowdfunding campaign, the next thing is to decide crowdfunding fulfillment. This service helps in fulfilling and shipping orders.
Where Crowdfunding Belongs in Your Project?
Simply put, you’ll
need crowdfunding at the SEED or Pre-SEED stage of your project. The
fundraising can start with your friends and family as well. According to the
new regulations, you should test the water before bigger expenses come your
way.
Conclusion
It is essential
to find a better crowdfunding site for your intended use. With the right
website and better planning, you will have a better chance of success.