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What Is Crowdfunding And Why Do I Need To Know About It?
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What Is Crowdfunding And Why Do I Need To Know About It?

Going to a bank and seeking investment funding for a business venture is not as easy as it once was. Since the glob...

What Is Crowdfunding And Why Do I Need To Know About It?

Going to a bank and seeking investment funding for a business venture is not as easy as it once was. Since the global economic crisis, financial institutions have become far less willing to lend money to businesses, especially if you have little or no collateral to offer up as part of the deal.

 

Thankfully, crowdfunding has stepped in to fill the gap.

 

So what IS crowdfunding?

If you’re not familiar with crowdfunding, here’s a brief introduction: Essentially, crowdfunding groups the financial resources of multiple lenders or interested parties in order to fund the needs of a new venture.

 

Crowdfunding works in various different ways, depending on the platform you choose. Here are a couple of examples:

 

Kickstarter

Kickstarter is perhaps the best-known crowdfunding platform. Businesses or individuals post details of their plans and include a short introductory video. Investors can then pledge an amount of money towards the successful completion of the project.

 

Each project has a funding target. If there’s insufficient interest to meet the target within the chosen time limit, the project doesn’t proceed.

 

Where Kickstarter differs from many other crowdfunding platforms is that investors don’t actually get their money back, as such. Instead, the people requesting funding offer specific rewards to those who pledge money. For example, in the development of a video game, someone pledging $30 may receive a copy of the game on release, whereas a $1000 investor may have a character named after them and receive an invitation to the game’s launch party.

 

 

Alternatives

Other crowdfunding platforms such as SeedUps in Canada and Seedrs in Europe work slightly differently. On these platforms, people gain equity in the businesses they support. Other platforms instead provide crowd-funded loans that are paid back at a certain point.

 

Whatever your business plans are, it’s worth looking into crowdfunding as a means of raising money. New platforms are appearing all the time, and you’re sure to find one that is a good fit for your ideas. If you can convince investors that your ideas are good, you could find the needed capital, even if the banks remain stubbornly disinterested.

 

If you need further convincing, just take a look at this list, and see how many businesses have gotten off the ground thanks to this kind of financing.

 

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