Crowdfunding has become a favorite source for investments nowadays. Many companies have built themselves on only crowdfunding because it supplied them with enough or more than enough money to make their product or service come alive. Crowdfunding happens when a large group of people agrees to make contributions towards a project, business venture, or charitable cause.
In 2015, crowdfunding alone raised over $34 billion. This alternative form of finance has supported many companies and charities. There are multiple ways to contribute to a crowdfunded project. Many companies run their funding program through mail-order subscriptions and online payments. Some businesses prefer to use benefit events as well.
Modern crowdfunding is mainly done online now. A model has been created to push these types of investments effectively. First, there is a project initiator who is responsible for proposing the idea to the public and announcing that crowdfunding will help complete the project. Next, the project initiator needs to find individuals or groups that support his/her idea. Lastly, the project will need a moderating organization that brings all of the said parties together to launch the idea as well as the campaign for crowdfunding.
Crowdfunding can grow a business beyond its wildest dreams. In 2014, the Coolest Cooler raised over $13 million through a crowdfunding campaign. Back in 2012, the up and coming smart watch industry added Pebble to the market. Pebble was able to raise over $10 million through their crowdfunding campaign. Their crowdfunding campaign didn’t stop there though. They now have over $20 million crowdfunded to support the growth of their company.
Most companies prefer to start their campaign through Kickstarter because it has become a top-rated website for up and coming products or services. Kickstarter had raised well over $2 billion for new ventures since its launch back in 2009. Indiegogo trails Kickstarter while Circle Up comes in third place for how much the platform has raised for new ventures.
This method of fundraising has become increasingly popular, and more people are contributing to others’ ideas. Also, consumers are starting to give money for individuals’ medical expenses, travel plans, charity projects and more!
While crowdfunding is supporting multiple types of ventures, there are many different ways companies entice people to contribute to their idea. There are two main ways to do this which are rewards based crowdfunding and equity based crowdfunding.
Rewards based crowdfunding is otherwise known as non-equity based crowdfunding, and it occurs when a group of individuals contribute to the project because they believe the outcome will benefit them which often occurs for motion picture productions because consumers are excited for a film to release and decide to contribute their money to make that happen. Scientific research also benefits from this type of crowdfunding because individuals want to find an answer to a question just as much as the scientists conducting the research do.
Equity based crowdfunding happens when the crowdfunding leads to the building of a new business. That company then provides capital to those who have invested which then helps consumers to feel more compelled to invest in the firm. Consumers’ thought is that if the project is a success and creates a thriving business, they can receive a nice return on investment.
In a nutshell, crowdfunding is an innovative way to raise money for a cause, business, project, etc. It can fundraise money for just about anything. There are a variety of ways to start a crowdfunding project as well as many ways to conduct crowdfunding. It is all simply a matter of finding the right medium and method for the project or business.