(Newswire.net — November 3, 2020) — Crowdfunding has revolutionised the way individuals can collect funds for their projects. This term describes collection of small amounts of money from a big number of people in order to fulfill a goal necessary to implement a certain project. Until this alternative financing has emerged, inventors and visionaries were solely dependent on big capital owners that could impose their will due to the obvious financial leverage as well as they could decide which products will see the light of the day and which will not – common people did not have as much to say in that matter. Even though historically, fundraising events and benefit balls have been organized, they were very exclusive and not everyone could participate.
Owing to this alternative fundraising method described in the article, the society can benefit from products that are really needed and might solve the everyday problems. The supply is not dependent on venture capital firms anymore, as anyone can contribute, and hence – help create the future people actually want.
The benefits of this procedure are endless – firstly, the worldwide access to potential supporters is granted thanks to internet connection – with possibility to promote your fundraising more regionally, if preferred. This means that if you would like to, you can allow people (the so-called micro-investors) from every place in the world to chip in for your fundraise – if they find the project worth their time and money. This helps build connections between people and the sense of community.
Secondly, due to the reduction of the middlemen’s influence, the possibility of direct contact between supporters and authors of the project is easy. That way, the inventors can get constructive feedback on their product from the individuals who share the same values as them, and not only people concentrated on the commercialization success. Moreover, the process of crowdfunding is very easy and accessible, although its details may vary depending on what fundraising platform one has chosen to use.
There are a variety of investment platforms online, and even though they share the same goal, they might offer different features and services for their backers and inventors of projects. For instance, the important factors one should consider before deciding which internet crowdfunding platform they want to operate on, are: the barrier entry (is it high or low? what is the lowest amount of money a potential investor can support a project with?), whether or not the projects enlisted on the platform are carefully vetted (this is important if you are an amateur investor or only starting to invest in projects; the preliminary evaluation of the project might reduce the risk of a failure to launch), etc. You should also research whether the platform’s fee is big or what happens if the fundraising does not reach its goal – do the money go back to the investors or do they lose it all?
Lastly, make sure you know what type of crowdfunding you are engaging in. The most basic distinction between them is the way the backers are rewarded for their money. So for instance, in return for the money pledged, one can receive some sort of an equity stake (the amount of return on investment depends on the success of the product), or shares of the company. In other cases, it is clearly stated that any money given for a project is simply a donation and rewards are not being given for the financial support – there might be some gadgets (for example merchandise) given as “thank you” presents – this kind of fundraising is called “reward-based”, but it is not required, although this practice also builds a sense of community. So make sure you know which of these types suits you and your ideas the best. These are all important questions one should answer before engaging in business activities.
Moreover, due to a large number of platforms specialized in fundraising, some of them are focused on a certain area of products and service. For instance, there are websites that gather financial supporters of new, struggling musicians, websites that only enlist highly vetted hi-tech start-up ideas, or platforms with a vocation of launching as many eco-friendly solutions as possible. So make sure you find the right one for your project or your money – and good luck!