In crowdfunding, customers or investors provide direct funding for a product or service. Crowdfunding uses the web for collaborative funding of projects, company growth, or expansion. Kickstarter and Indiegogo are two of the most popular project funding platforms in North America.
Crowdfunding is a crowdsourcing process where many people collaborate (by contributing ideas, work, and testing) to help make or improve a product.
Crowdfunding, which is divided into two models, is used for a variety of purposes:
- Donation-based crowdfunding does more than just enable project financing, it also supports companies dedicated to solving bigger problems.
For example,
- To raise money for non-profit organizations seeking to support a cause. Kiva.org is a crowdfunding website dedicated to financing microcredit for developing countries. In this structure, the employer pays the principal and interest.
2. To attract interest in a product or idea by rewarding shareholders or investors. Each funding level returns a different bonus in the form of a product or sponsorship promotion. Ouya, for example, is an open source game console that raised $8.5 million in 29 days. Ten months later, her fans received their gaming devices.
Investment-based crowdfunding is used by companies seeking equity funds and access to investors and is facilitated through sites such as SeedUps in Canada or Bondora by isePankur in Europe.
For example,
- To find investors to grow a company or increase production. Start-up Socket is the brainchild of CEO and founder Jessica Matthews. It’s a soccer ball that collects and stores kinetic energy while the players kick the ball, then you can connect its small light to the stored energy and turn on the emergency light. Socket raised $475,000 in a recent funding campaign.
- Raising equity in return for shares in the company. CrowdCube is one example of a stock website that small businesses can use to issue stock to accredited investors who want to make small investments.
If your company needs a financial boost to facilitate growth and traditional forms of financing are not meeting your needs, crowdfunding may be the answer. How do you decide if crowdfunding is right for you? find it outside,