What Is Crowdfunding? Until recently, when someone wanted to fund something — be it a new venture or a project, a startup, or anything that required capital to get it off the ground — there were only so many ways to raise money. They could either take on debt from a loan, ask family and friends to invest or loan a small amount, or approach angel investors to fund them. Or... They could even fund the project themselves by taking the "bootstrapping" route. And then, in the late 2000's, another option became available and soon caught the fancy of cashstrapped entrepreneurs trying to start a project: crowdfunding. Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture. With the spread of internet connectivity across the globe and the ability to make new connections in far-flung geographies, crowdfunding makes use of the easy to increase the pool of investors beyond one's traditional reach.
Is Crowdfunding free money? Honestly - no. There are no free fundraising websites.
Even the ones says they're free, aren't actually free at all. They only mean it's free to start your campaign with them. Which means in there is no signup or subscription fee. Crowdfunding platforms have to make money to survive, and in order to do so, they build in a percentage-based fee structure. Despite the fees, crowdfunding is still an extremely cost-effective option for fundraising. Here are the most common fundraising website fees: -
Subscription Fee Donor Fee Platform Fee Processor Fee
When you add-up all the fees you get the total cost of running your campaign on that particular platform. For a round-up post of all the best crowdfunding platforms visit this link… https://nuvopreneur.com/37-best-crowdfunding-sites-and-platforms/
Types of crowdfunding There are different types of funding based on what you give in return for other people's money.
Equity based- When you give your investors a share in your company ownership, it is called equity-based crowdfunding. It provides opportunities for people to invest in private companies (aka, startups).
Donation based- is when someone donates to a specific cause or charity. This is usually for public good and not for personal or any individual's benefit.
Reward based - This is best suited when you wish to launch a new product or service, which is likely to have mass-appeal. People invest in your project to unlock a specific reward linked to the project they support. For example, investors might help fund a new product line and later receive that product in return.
Debt based- Some project might be too small to get banks interested. This makes it ideal for obtain loans directly from other individuals without a bank or other financial institution acting as a middleman. Think of this as micro-lending using crowdfunding.
Real Estate crowdfunding - Real estate project usually capital intensive and require huge investments. Most of these might be off the plate for individual investors. Crowdfunding offers individual investors opportunities to invest in real estate projects with a small amount. This is especially useful because you don’t have to deal with mortgage brokers, real estate agents, or contractors. This is a specialized type of securities crowdfunding.
Personal Needs based- is a way for people to raise money to back their personal growth or projects. Investors are given the opportunity to fund a project in exchange for a share of the winnings.
Conclusion Crowdfunding offers a practical way for start-ups to raise capital for their projects without having to mortgage anything or having to go through banking circles. It allows you judge the response for your project even before launching it. Choose the right type of crowdfunding project to get your start-up off the ground and grow. To know about the top crowdfunding strategies and tactics, read this… https://nuvopreneur.com/crowdfunding-top-strategies-tactics/