What is Crowdfunding?


Crowdfunding Explained

Crowdfunding is the process of raising funds for a project from a large group of investors. These people are generally not into angel funding or VC funding but they are normal next door small-scale investors who like a project and want to be a part of it. Unlike corporate funding the crowdfunding can start from as low as USD 1 and has no upper limit. The process of crowdfunding mainly includes three parties. The first one is the one that has an idea, the second one is that who would like to invest in the idea and the third one is that who bring the first two together on the single platform. Traditionally crowdfunding projects takes place in an event or via subscriptions but nowadays a lot of web portals also provide the platform for crowdfunding. 

Type of Crowdfunding

Technically, there are two main types of crowdfunding that are Rewards and Equity. In the reward-based crowdfunding, the entrepreneur presents either a well-elaborated plan of the project or a working model of the product he wants to launch. It can also be an art project, film project or something similar. In such concept the backer gets either the product or the service in return and the entrepreneur does not have to provide any share in the company.

On the other hand, the equity-based crowdfunding offers share to the backer in the profits either for a specific period of time or a money pledge. Apart from these two types, there are some less common types of crowd funding as well. One of them is donation-based crowdfunding which is mainly designed to raise funds for an NGO or a group in order to enhance public life and space. In the end the main aim that is to achieve fundraise in any crowdfunding project.

How to get Crowdfunding?

There are two simple ways to go for crowd funding. The first is offline in which you approach an organizer for the crowdfunding event. The organizer will invite backers from a different section of the society and you will present your plan in front of them. Another way is online which is more productive and fruitful. Websites like Kickstarter and Indiegogo provide platform crowd funding. These websites have made fundraising online much simpler and easier process. All you have to do is to register on the website and prepare a good presentation for your project. In case you are going to launch a product, it is better to have a working prototype to show to the backers.

Does Crowdfunding Works or Projects Fail in the Wnd?

In 44% cases, the target of the fundraising is achieved. According to the stats provided by fundraising platform Kickstarter, a successful campaign raises USD 7800 on an average. The case is little different in the case of Indiegogo which claims that 9.8 percent of the project achieve their goal. It all depends on how well you have presented your case and how useful the product can be. Some projects do fail to raise the funds but that does not mean that crowdfunding does not work at all.

Crowdfunding is a simple yet effective solution for those who have great ideas but do not have enough funds to bring them to reality. 

Leave a Reply

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.