What is Crowdfunding

Crowdfunding is a way of raising money to finance projects and businesses. It enables fundraisers to collect money from many people via online platforms.

Start-ups and small businesses most frequently use crowdfunding as a means of obtaining alternative capital. It is a creative way of sourcing funding for new projects, businesses, or ideas.

It may also be a means of creating a network of support for your product/service. You can access new customers and acquire vital industry information by using the strength of the online community.

Entrepreneurs, businesspeople, and organizations—particularly small and medium enterprises—are the target audience for this resource.

Websites that facilitate communication between fundraisers and the public are known as crowdfunding platforms. Through the crowdfunding platform, financial pledges can be made and collected.

If the fundraising campaign is successful, crowdfunding platforms typically charge fundraisers a fee. Platforms for crowdfunding are required to offer a safe and simple service in exchange.

A funding strategy that is all-or-nothing is used by many platforms. This implies that if you meet your goal, you will receive the money, and if not, everyone will receive their money back with no repercussions or financial loss.

There are several different sorts of crowdsourcing, which are described here:

Peer-to-peer lending

The crowd lends money to a company with the understanding that the money will be repaid with interest. It is very similar to traditional borrowing from a bank, except that you borrow from lots of investors.

Equity crowdfunding

Sale of a stake in a business to a number of investors in return for investment. The idea is similar to how common stock is bought or sold on a stock exchange, or to a venture capital. More about this sort of crowdfunding can be found in this article

Rewards-based crowdfunding

Individuals donate to a project or business with expectations of receiving in return a non-financial reward, such as goods or services, at a later stage in exchange of their contribution.

Donation-based crowdfunding

Individuals donate small amounts to meet the larger funding aim of a specific charitable project while receiving no financial or material return.

Profit-sharing / revenue-sharing

Businesses can share future profits or revenues with the crowd in return for funding now.

Debt-securities crowdfunding

Individuals invest in a debt security issued by the company, such as a bond.

Hybrid models

Offer businesses the opportunity to combine elements of more than one crowdfunding type.