Posted On: 2022-06-21 17:55:43
Online crowdfunding is one of the secure ways to gather funds. Crowdfunding platforms have changed the process of fundraising. In India there are various types of crowdfunding:
Reward-based crowdfunding is a way to raise funds for a new product, service or business. The business or product owners solicit a large number of people i.e the crowd to contribute to the fundraising campaign.
How It Works
Business owners or brand owners describe their project or business idea on a crowdfunding platform. These are promoted through social media platforms to reach the maximum number of people in the crowd. The fundraiser has all the details regarding the business idea or project. The visitors on the platform can check the originality of the product by the given details of the company and the owner.
Based on this information and the detailed story, the crowd can decide whether to contribute to the fundraiser or not. This type of crowdfunding is widely used to support business start-ups, brand products or business ideas of existing organisations.
The promise of a reward
The crowd contributes to the fundraising campaign in return for a reward. This reward is primarily disclosed along with the other essential details of the fundraiser. The rewards are mainly either the service or the product for which the fundraiser is initiated.
Additional items may be included along with the returns like:
branded t-shirts,
bumper stickers,
bobbleheads, and more.
Who can contribute?
Any individual or organization can contribute to a reward-based crowdfunding campaign. A friend, family member, any other individual, business partner, or customer can contribute.
Individual donations are often less, hence, owners or campaigners need to persuade business organisations to contribute to the campaign.
Pros of Rewards-Based Crowdfunding
Rewards-based crowdfunding has many benefits to it. A few of them are.
1. It is cost-effective. It is one of the easiest ways to raise capital for a business or idea. Many crowdfunding websites charge a minimal platform fee and nothing more than that.
2. The product that is due for the launch in the market, gains exposure in the market. When the product is finally launched in the market, it is already known to be a major part of the market because of the fundraiser.
3. No collateral, credit check or previous business experience is needed to run a fundraising campaign. The crowdfunding platforms function digitally, including promotions and advertising.
4. The process is simple and doesn’t require professional financial or legal help. The online crowdfunding platforms are designed in a way that the campaigner can run the campaign easily.
5. Business or start-up owners can pre-sell their products, ideas, or projects. Because of the campaign and social media promotions, the market knows the project or product.
Cons Of Rewards-Based Crowdfunding
Although widely used and extremely beneficial, there are certain drawbacks to rewards-based crowdfunding as well.
1. The biggest drawback of reward-based crowdfunding if the campaigner does not reach the goal, any amount raised will be forfeited. The campaign is a complete fail.
2. As the new product gets exposure before its launch in the market, so does the idea behind it. Pitching the idea online exposes its competitors. Competitors might use it for their purpose.
3. Most of the time, just putting the idea or project online does get the funds rolling in. A heavy marketing strategy is required to promote the idea This could be time-consuming.
Reward-based crowdfunding is suitable mainly for
Crowdfunding platforms like Kickstarter, Indiegogo, and Patreon are one of the largest platforms that support reward-based crowdfunding.
The Bottom Line...
Reward-based crowdfunding is one of the best ways to raise capital for a business or start-up owner. Reward-based crowdfunding allows businesses to raise capital from a large group of individuals by offering a tangible reward. The return is often the service or the product for which the funds are raised. With benefits like early market exposure and a cost-effective and simple process, reward crowdfunding is one of the best ways to raise funds.
Filaantro is one trustworthy online crowdfunding platform that raises funds for every cause that one truly believes in. With the user-friendly interface, easy withdrawals, social media promotions and tax benefits, Filaantro makes the fundraising experience an easy and transparent journey.
Visit us at filaantro.org to know more
Author: Anjali Patel
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