What is crowdfunding and what are its different types?
Having a great idea needs a support for it to taste success. And if it is a business idea, one needs capital which can be borrowed from banks, family or friends. But in this digitally savvy world, people can also raise money using a website as a medium.
So how is that possible? The answer is Crowdfunding. as its very name suggests, is a way of receiving funds from numerous lenders for one's business, project, an innovative idea, an artistic work or for charity. Here, the fundraiser campaigns his idea on a crowdfunding website, seeking funds. The multiple individuals (Crowd) who are attracted to the idea come forward to offer funds.
With growing popularity of crowdfunding and an increasing number of people taking to crowdfunding to raise money, big business can easily happen. The number of crowdfunding sites is also increasing and many entrepreneurs are showing willingness to launch crowdfunding websites, especially niche crowdfunding websites.
Types of Crowdfunding
In this type of crowdfunding, lenders offer finance to startup companies, and in return they get repaid with the interest amount in regular intervals of time. Ideally, such loans can be availed by fundraisers at a low-interest rate when compared to those offered by banks. This type of crowdfunding is also called lending based crowdfunding or loan-based crowdfunding.
This is altogether a different kind of crowdfunding. Meant for raising funds for social issues and causes, it is a platform for donors with a social conscience and NGOs. Even the individuals who are in necessity of money can campaign and raise money. Nothing is offered in return to the donors, expect a token of gratitude.
The owner of the startup gets money for his project from the crowd. In return, the investors get an equity stake in the company. Meaning, they too become part-owners of the company. This investment is made in the assumption that the startup company becomes successful. With the success of the company, the investors make profits in the form of dividend and distribution.
Having created for the mass market, the reward based crowdfunding is the most famous of all. In this crowdfunding, the fundraisers do not have to pay back the amount raised in the form of a loan. However, donors receive tangible products in the form of gifts, rewards or a copy of the product produced by the fundraiser's startup company.
To meet the demand for more crowdfunding websites and niche crowdfunding platforms that are vertical based, many entrepreneurs are showing interest in launching advanced crowdfunding websites. As a result, there is a demand for a perfect crowdfunding script which can be used to create a sophisticated crowdfunding platform. All that said, the concept of crowdfunding will no doubt herald a new era in the launch of crowdfunding platform startups in the days to come.