Types of crowdfunding

Posted On: 2021-01-02 05:33:08

Online Crowdfunding is the method of funding a project, cause or venture by raising small amounts of funds from a large number of people, typically via the Internet platforms.

Donation-based crowdfunding

Donation-based crowdfunding is a means to raise money for a project or cause by requesting a large number of donors to individually donate a small amount to the project or cause. In return, the patrons may receive rewards that progress in eminence as the size of the donation increases. For the smallest amounts, however, the funder may receive nothing at all.

One of the most famous types of fundraising is donation-based crowdfunding which is simply requesting a small donation from a large number of people to raise funds for something or someone you care about.

How Does Donation-Based Crowdfunding Work?

Donation-based crowdfunding is a great way to raise money for particular individual needs as well as community-based causes and projects. You can share your fundraiser campaign with your channels and ask them to share it furthermore, also on social media. There are ways to amplify awareness and encourage more donations.

Examples of donation-based crowdfunding involve raising funds to cover medical expenditures or an unforeseen financial crisis or raising funds for local projects like a community nursery or baby feeding centre.

Reward-based crowdfunding

Reward-based crowdfunding includes individuals contributing comparatively small amounts of funds to projects and causes in return for some sort of reward. The size of the reward is usually a representation of the fund contributed.

Rewards can differ from something simple such as a thank-you note to a production variant of the crowdfunded product to cashback.

How Does Reward-Based Crowdfunding Work?

With rewards-based crowdfunding, donors or contributors can earn rewards based on the fund they donate. Common rewards involve homemade items, prizes donated by partner companies or free goods or services allowed by the organizer. For example, a vocalist starting a studio can allow the donors to use the studio or provide free supplies to the music as a reward.

Equity crowdfunding

Equity crowdfunding is the method whereby individuals (i.e. the 'crowd' or the 'public') invest in an early-stage unregistered (unlisted)company (a company that is not listed on a stock business) in exchange for shares in that company. A shareholder has partial ownership of the business and attains to benefit should the business do well. The reverse is also valid, so if the business loses investors can lose little, or all, of their investment.

How Does Equity Crowdfunding Work?

In exchange for donations, donors or investors receive a percentage holding in the company. This percentage alters depending on the company and can be a great way for businesses to promptly raise funds without the headache of a traditional bank loan.

Debt Crowdfunding

In simple terms, debt-based crowdfunding is the practice of raising funds from individuals, in return for interest. The person who supports your project by putting his financiers is known as an investor. In other words, debt-based crowdfunding is also called "crowdlending."

Also known as peer-to-peer lending, debt crowdfunding is a quick and easy method for both individuals and businesses to raise the money they need when they need it.

How Does Debt Crowdfunding Work?

Debt crowdfunding operates by receiving donations with the obligation to pay them back at a later date. Debt crowdfunding is usually used by businesses that need resources, and that prefer to pay back the funds rather than give out ownership. Individuals also use debt crowdfunding when they need funds to pay off a mortgage or loan or other financial obligation. With a debt fundraiser, make sure to clearly state what the business is needed for and when donors can expect repayment.

Start crowdfunding for your cause today

For the majority of crowdfunding needs, donation-based crowdfunding is the best solution. There are no complex requirements to start a donation-based fundraiser, and no lengthy waiting periods to receive the funds you’ve gathered. And unlike other forms of crowdfunding, donation-based means you nevermore have to repay the money. Plus, people love supporting and acknowledging causes, ideas, and other people with who they relate with. We can all agree that it feels good to do good.

Author : Lubdha Dhanopia