The Basics of Crowdfunding

Do you have an idea that can change the conventions or the money to be the pillar to these life-transforming concepts? Then crowdfunding is a term that you have to be familiar with before devising plans for such a technological marvel. You need not be a technical genius to have an understanding of crowdfunding. It simply is a method to raise funds for supporting your innovative ideas, thereby paving the way to better development of the product. Many startups like the Oculus VR began their journey in the market as crowdfunding projects.

You can raise funds through crowdfunding with efforts put in by family, acquaintances, friends, individual investors, and customers. These initial efforts act collectively towards bringing the concept into the crowdfunding sites and social media to familiarize the people with the product. Keep a tab on the growing popularity of the product, which should be achieved by leveraging on the social and crowdfunding networks. By doing so, you are likely to receive more customers and tremendous response for the product through the enormous exposure on the digital platforms.

What is Unique About Crowdfunding?

When you have a business plan on your mind but no finance to materialize the idea, there wouldn’t be an option left but to raise funds or lend it. The traditional method of fundraising will necessitate an adequately set out business plan, prototypes, and research, which would be later presented to the group of interested wealthy individuals or institutions. Most of the traditional funding services are provided by angel investors, banks, and venture capitalists.

Now what stands out about crowdfunding is the aspect of having a single platform where everything from building to sharing pitch resources is done. The developers will have to put in an extra effort here to sift through the personal network, find potential investors, and spend money and time to approach them. Although this is as a time-consuming task, finding opportunities to meet the investors and establishing their project is more straightforward through crowdfunding. You will have several perks when you choose crowdfunding over traditional fundraising methods, some of which may include investing in thousands of exchanges for acquiring equity, the small contribution of $20 in exchange for a first-run product, or other rewards.

Types of Crowdfunding

Business plans have taken a different path with the wide acceptance of crowdfunding, adding to the changing face of the economy. It could appear to you just as a form of raising funds to run a company, but crowdfunding isn’t as superficial a that. It has several features and a few types that make it unique. Here are the different types of crowdfunding:

·         Reward-based crowdfunding

In this type of crowdfunding, people will pledge money on a particular project (creative or technology) in its development stage. Both Kickstarter and Indiegogo follow this method of crowdfunding.

·         Peer-to-Peer Lending

This type of crowdfunding practices lending of funds outside the traditional banking channels. Debt-based crowdfunding is, therefore, risky business for the lenders.

·         Donation-based Crowdfunding

This type combines the aspects of online crowdfunding and micro-finance to fund small businesses in their growing stages