Crowdfunding – What Crowdfunding is – How Crowdfunding works – How to Benefit as an Investor crowdfunding a Project

Crowdfunding | Websites – Platforms | Investors – Donation | How to Raise Funds – Fund a Project | Idea | Business |

Do you have an idea, a project, or a Business that needs funds or capital to kick-off? If you have then you need the knowledge of how crowdfunding works, how to raise the capital or funds you need, as well as how to get a lot more people called investors to crowdfund your idea, project, or business.

Crowdfunding

Let’s start with the word crowdfunding, just as the name implies, it’s a venture strategy first used in 1997, but went on to gain popularity from 2006 to 2011.

Simply put, crowdfunding is when an individual’s project or idea is funded by the crowd by donation through an online platform, mostly a website.

Anyone; an individual, an organization, a community can be funded. Out there on the internet is lots of Crowdfunding websites that Crowdfund different projects such a new business, political campaign, charity work, community development project, scholarships, etc. just anything can be Crowdfunded so long as it’s enticing enough garner the attention of the masses.

Crowdfunding – What Crowdfunding is?

Let’s face the fact, raising money online and from individuals, you aren’t related to can sometimes look like an uphill task. However, with the successes recorded from people over the years, it can still act as an option for raising the cash you need to start up your business.

Today, crowdfunding is done through an online platform; a website created for a specific thing to fund. For instance, they are websites that focus on funding start up entrepreneurs, others on businesses that need to scale up, while some on charity, etc.

The platform runs through organizations or people who donate to crowdfunding projects in return for a reward often called investors. If an individual or an organization needs to raise a fund for a project, they simply look for a crowd-funding website that funds the type of project they are looking forward to raising funds for, visit the site, submit information about the projects or idea they would like to be funded and anticipate that people will find it worthy and donate towards it.

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How does Crowdfunding works?

The restrictions on who is allowed to fund a project, the amount they are allowed to invest, and the project to be funded are controlled by crowd-funding platforms or websites. Thus investors can choose or select from lots of projects and fund it even with a little amount on different crowdfunding sites.

For Crowdfunding to be possible three parties must come together; the project initiator who proposes the idea or project to be funded, individuals or groups who support the idea, and a moderating organization (platform/website) that brings the parties together to launch the idea.

The platform provides an overview of the projects to be funded submitted by the project initiators. This is why any project worthy of funding must be going through a crowdfunding platform mostly for regulation purposes.

Crowdfunding platforms – Websites that Provides Crowdfunding Services

Crowdfunding has been used to fund a wide range of for-profit, entrepreneurial ventures such as artistic and creative projects, medical expenses, travel, and community-oriented social entrepreneurship projects.

However, it has also been criticized for funding quackery, especially costly and fraudulent cancer treatments, false projects that never existed. Lots of people in time past has raised funds for projects and end up using the money for a different purpose which is why Crowdfunding organizations or platform exist to regulate what is to be funded, why and who is to fund.

  • Indiegogo – Best for funding just anything
  • Causes – Best for Nonprofits crowd-funding
  • Patreon – Best for crowdfunding Creators/Arts
  • GoFundMe – Best for Personal Fundraising
  • CircleUp – Best for Equity Crowdfunding
  • LendingClub – Best for Crowdfunding Business Loans
  • Fundly – Best for Individual Crowdfunding
  • Bonfire – Best for crowdfunding products
  • Double Donation – Nonprofits crowdfunding
  • Donate Kindly – Best for crowdfunding schools
  • Kickstarter – best for crowdfunding creative projects
  • Crowdfunder – Best for crowd-funding Equity
  • LendingClub – Best for Lending
  • Fundraise – best for funding Real Estate
  • GiveSendGo – Best for Crowdfunding Religion
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How to Crowdfund as an Investor – the Investors Guideline – Crowdfunding Guide for Investors

If you contribute to crowdfunding a project you are an investor and hope to earn interest or participate in future profits of that project.

Two types of funding platforms

  1. Funding platforms that are relying on an exemption from the dealer registration exemption must not provide you with advice about your investment. In this case, you will have to assess the suitability of the investment on your own.
  2. Funding platforms that are operated by registered dealers are obligated to determine if the investment is suitable for your situation.

When investing Pay close attention to the risk warnings. Before you invest, the funding portal will ask you to confirm that you have read and understood the risk warnings and the offering document. These investments are risky and you could lose your entire investment.

Types of Crowdfunding

  1. Reward-based
  2. Donation-based
  3. Litigation
  4. Debt-based
  5. Software value token
  6. Equity

What to look out for before Funding a Project/Idea/Business as an Investor

In the event you see a project, an idea or business that appealing enough to fund, you wouldn’t just delve in and push in your hard-earned money into it, you must pass the project through thorough scrutiny to check its crowd-funding worthiness.

You will need to access some basic information about the project and check things such as;

  • The project to be funded
  • What the intended funding will be used for
  • The amount a project intends to raise
  • Current raised amount if any
  • The period the crowdfunding is meant to last
  • The number of people who have invested in the project
  • The investors’ benefits
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Investors Benefits – Is there an investor benefit for Funding a project?

When crowd-funding started, it was just simply a donation of the willing without any reward or benefits attached. So, people simply donated because they want to, not that they will benefit from donating. But that is changed today.

Most crowdfunding projects on crowdfunding sites are based on rewards. These rewards are designed to entice rewards-based type investors as returns for their donation. Simply put, let’s say, you invest in products-based crowdfunding, in the end, if the product is finally launched all funders might get the product for free as a reward for donating or investing in the product.

The job of a crowdfunding website is to make sure each individual who invested in the products earns an equal share of the products.

Do you Payback Crowdfunding Funds?

Yes, and No, depending on the type of project crowdfunded. Yes, If people donated for a reward-based project, then you would have to pay back by making sure they get their reward if you or they meet up with the terms and conditions attached to receiving rewards.

No, if there is no reward attached to your crowd-funding and it’s typically based on wiliness to donate. In this case, you must find a way to convince people to donate, as reward based crowd-funding has a way of enticing people to donate than freewill donation.

They have to be strong why that will make people donate to your project seeing that there is nothing in it for them.

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