Crowdfunding is considered as the practice of funding to the venture or the project with the rise of a small amount of money that comes from a large number of people with the help of internet.
The concept of crowdfunding is also referred to as the alternative finance and crowdsourcing. In the worldwide estimation of the year 2015, it is concluded that the total number of US $34 billion was raised with the crowdfunding. Although there are very similar concepts to crowdfunding that can be executed through the benefit events, mail order subscription and various other methods, the crowdfunding is based on the internet-mediated registers.
The modern concept of the crowdfunding model is primarily based on three different types of actors that includes the groups and individuals which supports for the idea, the moderating organization, that is responsible for bringing the various parties together in order to launch the idea, and the project initiator who is responsible for the proposing the project and idea to be funded.
The main idea behind the crowdfunding is to fund the wide range of for-profit and entrepreneurial ventures including the medical expenses, the creative and artistic projects, travel, and the community-oriented projects of social entrepreneurship.
Types of Crowdfunding
There are two primary types of the crowdfunding that includes the reward-based crowdfunding and equity crowdfunding.
The use of reward-based crowdfunding is for various purposes that include the motion picture promotion, civic projects, and the free software development as well as inventions development. Scientific research is also one of them. In the reward-based funding, the process of funding doesn’t rely on the location.
On the other hand, the equity crowdfunding is considered as the collection of efforts of all the individuals in order to support the efforts that initiated by the organizations and other people through the provisions of the finance in the form of the equity.
The equity crowdfunding is better as compared to the reward-based crowdfunding as it has the potential to offer the securities for the return on the investment. Apart from this, the crowdfunding is also categorized into donation-based crowdfunding.
The donation-based crowdfunding is the way to collect a large amount of money in order to develop a project by asking the number of people to donate the small amount of money into it. and in return, the contributors may get the token rewards.
The rewarded tokens can be helpful for increasing the prestige size as the size of donation also increases.
|Rewards based raises helps startups in providing an item of value in exchange for the capital commitment. For example: if $50 is committed by the Backer, then the starter might provide a copy of product once the product is produced.||Shares of the stock of company might be offered by the companies themselves, directly for accrediting the investors in exchange for funding commitment. This can include the Debt funding and Convertible funding.|
|Reward-based funding involves individuals that contribute to the business.||Unlike the reward based and donation based methods, the equity-based crowdfunding helps the contributors to become the part owners of the company.|
|It provides customer incentives and pre-orders.||It provides equity stake in the company.|
|Rewards are available to anyone.||Equity is available to accredited investors.|
|There is no equity dilution.||Stock must be issued in a company.|
Some of the benefits
The concept of Crowdfunding offers many benefits in terms of social and creative crowdfunding.
It provides instant validation of the project ideas that reduce the time that spends on the ideas that turn out to be viable, it offers the loan repayment without the debts, provides the platform in order gather the funds quickly, is able to generate the buzz of the brand, and provide the marketing platform that meets with the market target.
There are various types of crowdfunding platforms such as Fundable, thousands of accredited investors can be accessed, and the business organizations can also access, interact as well as share the crowdfunding campaign. With the creation of the crowdfunding, the invaluable processes can be seen.
Along with this, the business organization can also increase the PR and marketing. From the project launching to the project creation, the campaign can be shared and promoted through the newsletters, email letters, social media as well other social media platforms.
The representation of business ideas or concepts to the different platforms has the excellent opportunity in order to validate as well refine the different offerings. With this, the potential customers are also able to express their interest in the particular project and can also ask the questions.
Along with this, one of the important, as well as the best thing about crowdfunding is that it has the ability to streamline and centralize the efforts of fundraising. With the development of simple, comprehensive profile, the investors are able to make the project prospectus.
The simplest benefit of the crowdfunding is that instead of wasting the efforts in the document printing, updating manually, and compiling of the binders, the easy format is available in which there are fewer efforts of document making and is easily accessible. The created format also has the online presence that helps in leaving the more runs to business instead of the fundraising.
The most common type of the crowdfunding fundraising is the use of sites such as Indiegogo and Kickstarter variety, in which the donations are sought in the form of return to the special investment and rewards. Thus it may be responsible for having the free product and even the chance in order to involve in the service or product.
Also, it is possible to use the concept of crowdfunding in order to assemble the royalty and loan financing services. For example, the site named as Lending Club allows all the members in order to directly invest in as well as borrow from each other along with the claim of eliminating the banking middleman in which both the sides can win with the processing of transactions.
I am William Lucas, an IT professional and a technology enthusiast who reads and writes every day on emerging technologies and their implications in various sectors such as education, communication, business etc. For more than a decade, I have been working for an Australian company Assignment Help as an essay writer to assist students in writing better academic essays and articles.