April 10, 2020 / Beginners

Crowdfunding: The Way To Raise Funds In 2020

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There is the era of startups now. However, the main problem of any startup is to find financing.

Of course, there are investors, incubators, etc. If you yourself know what to do, then you can use an alternative way to raise funds – crowdfunding.

What Is Crowdfunding

Crowdfunding is a collective collaboration of people who voluntarily pool their money or other resources together, usually via the Internet.

This is the official definition of crowdfunding and it includes almost any massive fundraising like charity or professional investments.

Let’s define the types of activities related to crowdfunding:

  • Crowdlending differs from crowdfunding in that people give loans, and the debtor agrees to refund with interest. You can lend money to both individuals (p2p-landing) and business (p2b-landing).
  • Crowdinvesting – a thing very similar to crowdfunding, only money will not be given by sympathetic people and fans, but by professional investors, who in return will require a share of the profits. It differs from ordinary investing in that it invests a large number of people, and the share of an individual investor is very small.

But crowdfunding does not mean donations. There is indeed such a share of projects on crowdfunded platforms, but this is only one niche.

Usually, the people who provide the funds are promised in return early access to some content, a finished product at a low cost, or other goodies.

Crowdfunding also differs:

  • A clear goal – there is always a project and a person promoting it. And in order to receive money, this person must provide not only an idea but also step-by-step instructions for its implementation.
  • Limited timeframes for raising funds – usually a fundraising campaign is time-limited and if the required amount cannot be collected by the required date, then the money is distributed back to investors.
  • Functionality – for startups, crowdfunding financing is also useful because it allows you to understand how much people need your project i.e. It allows you to see a potential audience.

How Crowdfunding Works

Crowdfunding is also not begging because simply going out and asking for money will not work. Implementing a startup through public finance is a complex process and involves several steps.

How crowdfunding works:

  • Formation of an idea.
  • Choice of financing model.
  • The choice of platform.
  • The start of the campaign.
  • Promotion of an idea.
  • Reaching the goal.

World Crowdfunding Platforms

The most developed culture of co-financing in the United States. The most popular crowdfunding platforms are Kickstarter, Indiegoogo, Booomerang, and others.

Kickstarter

This is the largest and most popular crowdfunding venue in the world with hundreds of thousands, if not millions of active donors.

The platform is oriented primarily to the USA. However, the amounts of raised funds are impressive here, – the record-holders receive millions of dollars to implement the idea.

Kickstarter works only on the principle of “all or nothing”, so if you did not manage to collect the funds, then the depositors will simply be returned their money. The website gets 5% of all collected funds for its services.

Indiegogo

If there is someone who can compete with Kickstarter, this is Indiegogo. The website has been operating since 2008, is available in 235 countries and, according to the creators, has helped creative startups realize more than 800,000 ideas.

The platform is universal and does not work in a specific niche, but with the naked eye, you can see that most of the projects are related to design or gadgets.
However, unlike Kickstarter, which is almost 100% commercial, there are charity projects on Indiegogo – on the main page we are greeted by a banner campaign to raise funds to fight COVID-19.

Indiegogo’s signature feature is raising funds for a wedding, having a baby, or other important family events.

Another difference is that they will give you money, even if you managed to collect an incomplete amount. However, upon reaching the goal you will give the site 4% of the commission, and for part of the amount – 9%.

Booomerang

This is not a very popular platform, so it’s hardly suitable for really large projects. But Boomerang deserves a place in this list for two reasons at once:

  • It is for Europe – that is, it is a platform for a specific region, and if you plan to implement a project in the EU and neighboring countries, then it makes sense to start raising funds here;
  • It is niche – most campaigns are either charity or social projects.

Note, that Booomerang started like Kickstarter with software, games, and gadgets, but apparently the guys quickly realized that they could not compete with heavyweights like Kickstarter and Indiegogo and moved to the non-profit sector. Now it is one of the most popular European websites for social crowdfunding.

We also briefly mention PeerBackers and RocketHub – the first is a universal, but relatively unknown website, so you can collect money for anything, but not too much. Well, RocketHub, in addition to its universal character, is also distinguished by a beginner’s school, which will help you quickly understand the crowdfunding process.

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