Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people, today often performed via internet-mediated registries, but the concept can also be executed through mail-order subscriptions, benefit events, and other methods.
Gone those days when a startup needs funding only from investors , nowadays fundings can be raised by a group of people by contributing small amount. Henceforth giving an alternate method to all the fund raising techniques. As the name suggest, Crowd+Funding which means funds are raised by a bunch of similar thinking bodies who invest their money in your idea.
In crowdfunding, three major actors come into play:-
- The Initiator :- who proposes the project
- Crowd :- group of individuals who support the idea
- Platform :- a mediating organisations that brings the parties together to launch the idea.
Types of Crowdfunding:- The type of crowdfunding you select depends on the type of product and the services you offer. The primary type of crowdfundings are:-
- Donation-based crowdfunding:- In donation based crowdfunding, there is no financial return, the investors simply offer their donations so as to support your cause for charity and other non- beneficial assignments.
- Reward-based crowdfunding:- It is a subset of donation-based crowdfunding because there is no actual financial returns but small rewards are given as a token of gratitude towards their investors so as to encourage and appreciate them for their investments.
- Equity-based crowdfunding:- Unlike the other two, it allows the contributors to become part owners of your company and in response receive a financial return on their investment and share the profit with the company.
CROWDFUNDING?? :- If you are confused whether the crowdfunding concept is right for you or not? Or it can satisfy your financial demands?? Look here at these points:-
- More Efficient:- At an early stage it is difficult toraise funding well-stablished financers.They need more time and attention from you for their investment but by crowdfunding you can instantly connect to a large number of customers which can gave you a clear idea of how successful your buisness idea is.
- Grabbing attention:- In a startup it is very important to know the consumers response towards your product, hence it requires a lot of market research. But crowdfunding gave you a platform to spread information about your product,and to know consumer’s interest towards your idea. Thus validating your product even before its lauch!!.
- A Big Support:- The people who funded your idea become just like a family who supports you at tough times, become your loyal advocates and a honest advisor. They not only believe but also shares your vision with their frinds and family. Thus making your product value stronger without even get paid.
- Media Exposure:- A tweet or a bog can change the story of your product. Thus grabbing lot of eyes that attracts media and make the product popular.
Crowdfunding not only provide the startup with money but also provide validation, proof , exposure and finally a group of people who believe in you (which is not easily available at initial stage). Some of the crowdfunding platforms are:- Kickstarter , Indiegog.