The Age of Online Crowdfunding participants

Crowdfunding is the process of collecting funds through a holistic approach of numerous participants. It is usually in the form of a mass level collection of funds through donors and investors or both. The funds collected are used to support the efforts of, primarily, businesses, who started the process. Today, this funding is done for a wide variety of purposes, with charity being the most notable.
The motivation behind crowdfunding participation comes from the donor’s feeling that he or she is equally responsible for the success of the business. Crowdfunding is a viable option for many starting businesses because they can use their stakeholders to give feedback and promote the business within their circles for free. Crowdfunding is powerful because businesses have a platform to showcase their talent, where they can be easily seen.
crowdfunding piggy bank
Crowdfunding Basics
Crowdfunding is a simple process involving donors and or investors. Businesses seek funding and, in return, provide their backers with services, products, equity or nothing. It depends on the kind of campaign being conducted. Some campaigns are involved around providing equity for funding and others may be rewards based. We’ll get into campaigns a little further down in the article.
To further illustrate how crowdfunding works, an example of crowdfunding could be selling t-shirts in order to benefit a charity. In this example, the sellers and buyers are both contributing funds with the proceeds going to the Charity: the seller pays for the cost of the materials and labor in order to make the t-shirts and the buyer purchases the t-shirt.
The Age of Online Crowdfunding
Thanks to the internet, the phenomenon of crowdfunded investing is becoming enormously popular these days. Previously used methods of fundraising are now becoming more and more obsolete.
Crowdfunding is gaining mass attention because it’s easy and cost effective. Campaigns ask for smaller amounts of contribution by each individual, making investing in your business a more viable option. Because it is a collective approach on a mass level, the cost of advertising and marketing is also automatically reduced.
Social media such as Twitter and Facebook are of great help in promoting crowdfunded campaigns. Top crowdfunding sites include:
Kickstarter
Indiegogo
GoFundMe
Fundly
Rocket Hub
The best attribute about crowdfunding is it is based on the open market where savvy supporters are looking for high-end, potentially innovative, and promising ventures to put their money into.
Here are some other potential benefits of crowdfunding:
Pre-Launch Crowdfunding
Crowdfunding is a great opportunity to explore ways to raise capital before you even start your business. Whether your cause is for disaster relief, a salable product, launching a start-up, or a creative project, funds are easy to raise, as long as potential investors are interested in the idea. Crowdfunding can also be used for business expansion.
Viral Marketing
Crowdfunding helps in marketing a product while funds are still being raised. By generating interest and awareness, it helps a business reach wider audiences who carry forward the idea within their network for generating even more attention.
What it means is much of the marketing is done while the product is still raising money itself.
Listen to Crowd Feedback
When the idea reaches targeted investors, and they express interest in it, they are able to provide important feedback for product-market fit. Increased feedback frequency pinpoints weak design areas and improves the product or service before launch.
Crowdfunding Can Change the World
campaign donation
Another benefit of crowdfunding is that it opens up room for innovation. When an idea is publicly accessible, it creates a good fan base.
What was earlier known to only a handful of people is now known to thousands, or even millions, of people worldwide. Thus, crowdfunding makes not only products and services more innovative and democratic, but it encourages everyone to think outside of the box for creating better projects the world needs.
Today, crowdfunding is being used by people around the world for funding various activities from business, education, conservation, and more.
Flavors of Crowdfunding
Donation-based Crowdfunding
Believe it or not, there are campaigns for raising capital that are purely donation-based. In these campaigns, there is no expected return for investments. However, you will find campaigns that succeed are for worthy causes or ones people can proudly stand behind such as nonprofit, charity, and critical aid campaigns.
Rewards-based Crowdfunding
In reward-based campaigns, a business’ crowdfunding strategy is centered around providing its contributors with rewards in exchange for their capital. The reward could be in the form of a product or service your company is working towards creating. After securing your funding goal, your business establishes a promised completion date for the reward to be issued to contributors.
Reward-based crowdfunding campaigns are popular options because they incentivize investors with a form of compensation without having to give up a portion of their company’s equity.
Common rewards are promises of between 3 to