Take you all-round understanding of crowdfunding...
As the name suggests, crowdfunding is linked to money, but the money is only a small part of the amount, but it comes from a large number of people and is used to fund new business enterprises. Crowdfunding takes advantage of the large user base of the Internet and social media, as well as the coverage and convenience of the Internet, to bring investors and entrepreneurs together.with the possibility of extending entrepreneurship by increasing the pool of buyers past the standard circle of owners, relatives, and undertaking capitalists
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In most control situations, restrictions apply to who can fund new businesses and how much they can contribute. This is very similar to the restrictions of hedge funds, which should be designed to protect immature or less funded investors from putting excessive savings at risk. Because of the failure of so many new businesses, their traders face a high risk of giving up their principal.
Crowdfunding creates many new opportunities for new entrepreneurs and can collect thousands of dollars from everyone who has cash investment. Crowdfunding provides a platform for everyone with an idea to promote it in front of prepared investors.
One of the most attractive projects that received funding came from an individual who wanted to create a new potato salad recipe. His fundraising goal is only $10, but he has raised more than $55,000 from 6,911 supporters. Investors can choose from countless projects with an investment as low as $10. Crowdfunding websites generate revenue from a portion of the funds raised.
The two most ordinary uses of the term mirror the type of crowdfunding finished via start-up companies looking to carry a product or service into the world and by individuals who skilled some type of emergency. Many individuals affected by a natural disaster, expensive medical expense, or another tragic event such as a residence fire have obtained a quantity of economic assistance they would not in any other case have had access to thanks to crowdfunding platforms.
However, in latest years, some crowdfunding platforms such as Patreon and Substack have broadened the range of crowdfunding to provide a way for innovative people—artists, writers, musicians, or podcasters—to support their creative work by receiving a continuous supply of income.
Popular Crowdfunding Websites
Crowdfunding websites such as Kickstarter, Indiegogo, and GoFundMe attract hundreds of thousands of people hoping to create, or support, the next big thing.
Until 2021, GoFundMe is the largest crowdfunding platform. Since GoFundMe was established in 2010, the site has raised over $10 billion through more than 150 million donations.GoFundMe is the site most welcome and famous for individuals looking for restore from a medical expense or catastrophe such as natural disaster,a residence fire, or sudden emergency expense. Start-up corporations have a tendency to use Kickstarter.
Kickstarter is another commonly used platform. until 2021, Kickstarter has successfully funded nearly 200,000 projects since it was set up in 2009, with more than $5.7 billion pledged across all Kickstarter projects.Kickstarter is the most popular crowdfunding site for ambitious businesses hoping to raise funds and obtain a larger audience. Actually, different GoFundMe, Kickstarter can solely be used for creating projects that can be shared with others.
Furthermore, Kickstarter cannot be leveraged to raise capital to donate to a charity or cause, projects can't provide incentives like equity, profit sharing, or investment opportunities, nor can any project involve the site's list of prohibited items such as "any project claiming to diagnose, cure, treat, or prevent an illness or condition," political fundraising, drugs or alcohol, or any contests, coupons, gambling, and raffles.
Indiegogo started out as a crowdfunding website originally centered completely on elevating cash for independent films however started accepting initiatives from any class a year after its launch in 2007.
Compared with Kickstarter,Indiegogo is seen as a loose and more flexible platform.cause it offers backers options over whether they want fixed or flexible models—this is probably the most significant difference between the two crowdfunding platforms. Only after the campaign has reached its funding goal,Kickstarter releases funds, however Indiegogo permits the campaigner to receive funding pro-rata, or wait until their purpose is achieved.
As a campaigner, it might be easier and less risky to go with flexible funding (i.e., receiving funds as they come); however, regardless of the amount raised, campaigners must still deliver on any promises made. For a backer, fixed funding is more attractive as it is associated with much less of a risk.
Warning：Crowdfunding platform fees range from 5% to 12%. so be careful of punitive fee structures before selecting a crowdfunding platform.
The most apparent merit of crowdfunding for a start-up corporation or individual is its capability to provide chance for a larger and more different group of investors/supporters. With the universal of social media, crowdfunding platforms are an unbelievable way for businesses and individuals to both increase their audience and receive the funding they need.
Additionally, rewards-oriented is an important feature of many crowdfunding projects ; investors may get to get involved in the launch of a new product or receive a present for their investment. For example,those who Invest in a new soap made from bacon fat will get a new soap made by the manufacturer for free. Video games are a popular crowdfunding investment for gamers, who often receive advance copies of the game as a reward.
Equity-based crowdfunding is becoming more and more popular as it permits startups to raise capital without losing control of venture capital investors. In some circumstances, it also provides investors the chance to earn an equity position in the venture. In America, the Securities and Exchange Commission (SEC) supervises equity-based crowdfunding.
Hidden defects of crowdfunding include the possible destruction to you or your company's prestige caused by "complaining" to crowdfunding, the cost related to the crowdfunding site, and, at least on some platforms, if you don't accomplish your funding aim, any finance that has been pledged will be returned to your investors and finally you will receive nothing.
Access to funding you otherwise might not qualify for from traditional sources
Must comply with the rules/fees of the crowdfunding platform
Many of the products and businesses crowdfunded on Kickstarter became very successful and lucrative endeavors. For instance, Oculus VR, an American company specializing in virtual reality hardware and software products, was funded through the site. In 2012, founder Palmer Luckey launched a Kickstarter campaign to raise money to make virtual reality headsets designed for video gaming available to developers. The campaign crowdfunded $2.4 million, ten times the original goal of $250,000.In March 2014, Facebook, Inc. (FB) acquired Oculus VR for $2.3 billion in cash and stock.
Another example of a company that rose to success through the help of Kickstarter campaigns is M3D, a company founded by two friends that manufacture small 3D printers. David Jones and Michael Armani raised $3.4 million for their Micro 3D printer on the crowdfunding site in 2014.6 The tiny 3D printer, which comes with a variety of durable 3D inks, is now available at Staples, Amazon.com, Inc. (AMZN), Brookstone, and elsewhere.
To be continued...
