Crowd funding is an exercise of funding a project or idea by raising small amounts of contribution money from a large number of crowd, mostly done through online resources. Crowd funding offers individuals and groups a chance to showcase their ideas, businesses and projects to the world. Every campaign or project has a goal with a listed amount of money and number of days and the progress of the project will be tracked on regular basis.
Key points for a successful project:
Different types of Crowd Funding:
Reward Based: Individuals or Groups pre-sell a product or service to establish a business idea without being in debt or losing its assets. Reward based crowd funding is the most popular and is based on various purposes likely in the field of motion picture, software development, inventions and scientific research and civil projects. Reward based funding provides incentives for participating on certain amount of capital raised.
Equity Based: Individuals or Groups pledge their assets or money to get unlisted shares from the company. Equity based funding was favored after JOBS (Jumpstart Our Business Startups) Act in 2012 by US which opened pool for small investors. Equity based funding have a huge advantage compared to other crowd funding types with respect to the returns on the investment but it comes with a very high risk.
Credit Based: A lending platform where borrowers match their requirements with a group of investors willing to provide funding as credit. Credit Based funding can also be called as peer-to-peer lending and expects a better return on investment than playing it safe in a bond or mutual fund. Credit based funding is mostly on the personal level and not business level.
Donation Based: A platform more in a modern way of giving charity online where the individual or groups never expect a return or payoffs. Donation based funding raise funds for a specific cause which can be a social or business. They mostly run with a tag line of non-profitable projects. Sometimes it depends on the fund raiser to reward contributors with goodies like t-shirts, vouchers etc.
Benefits for the creators:
Benefits for the investors: