Category: Crowdfunding

Crowdfunding is the technique of gathering money from a large number of individuals. Generally through the internet, to support a project or business. It is a type of alternative financing and crowdsourcing. 

Although similar principles can be implemented via mail-order subscriptions, benefit events, and other means, the phrase crowdfunding relates to internet-mediated registries.

This modern crowdfunding model is generally based on three types of actors. The project creator who proposes the idea or project to be funded. Individuals or groups support the concept by providing financial support, and typically the “platform” where the project is hosted online. The platform brings the parties together to launch the idea. Also allows individuals to contribute financial support, and participate in the voting process.

It has a long history with numerous roots. Books have been crowdfunded for ages; writers and publishers would publicize book projects via prenumeration or subscription programs. If enough subscribers indicated their willingness to purchase the book once it was released, the book would be written and published. The subscription business model is not really crowdfunding because the actual flow of money begins only with the arrival of the product. However, the list of subscribers has the potential to instill the confidence required among investors to risk the publication.

According to the Crowdfunding Centre’s May 2014 study, there are two types:

Entrepreneurs pre-sell a product or service to launch a business venture without incurring debt or surrendering equity/shares using rewards crowdfunding.

Equity is a type of crowdfunding in which the supporter receives shares in a firm, typically in its early stages, in exchange for the money promised.