Crowdfunding is raising funds from small amounts from multiple backers. It’s been around for centuries, even the plinth for the statue of Liberty was crowdfunded. With the adoption of computers and new legislation it has become mainstream. But did you know there are at least five different types of crowdfunding?
Thank you for reading this post, don't forget to subscribe!Donations Crowdfunding
When a group of people get behind a cause or for a purpose, think GoFundMe or Fundrazr. Charities and not for profits are finding donations crowdfunding an effective way to engage and raise funds from a wider base of donors.
Rewards Crowdfunding
Backers get a tangible or intangible reward, think Indiegogo or Kickstarter. Great if you want to get the funds to pay to manufacture a product from a prototype, for market research and for backers to get early access at a great price.
Peer to Peer Lending
A group of backers invest in a company or group of companies looking to get their money back plus a return. It allows people to invest in early stage companies and reduce the risk by diversifying over multiple companies. For companies, this is access to capital, without giving up equity (ownership). Great if you know you will be making revenue soon.
Royalties
If you watch Dragon’s Den or Shark Tank then you’ve probably heard of royalties. Backers invest in a company and receive a set percentage for each sale of the item until the amount is repaid plus an agreed amount.
Equity Crowdfunding
Backers invest in a company and get equity in return, think Crowdcube or Republic. Companies not only gain access to capital but a group of advocates who believe in the company too, and can often be more patient than other traditional investors.
Which one is right for your organisation? Join the introduction to crowdfunding to decide whether crowdfunding is right for you.