Crowdfunding 101 – what is to know about?

All the technological advances have brought major changes in people’s lives and in all possible domains aside. In the last decades, the Internet has become probably the most important means of communication, the best choice when it comes to promoting various services or to get funding. If one wants to get funding for their non-profit organization, crowdfunding is one of the best choices they have. If you need crowdfunding help, you should do some research online right away in order to find the best company to help you with this matter.

What is crowdfunding exactly?

First things first, it is important to understand what crowdfunding is before you engage in such a project. According to the definition, this is an alternative method of funding that entrepreneurs, managers of non-profit organizations or various creative thinkers use. Crowdfunding, as the name suggests, implies raising small amounts of money from numerous people using the Internet and social media. People use various online platforms that are specifically designed to allow people from all over the world to contribute with a small amount of money to the funding of a non-profit organization for instance.

Types of crowdfunding

Another important thing you need to know about this method of funding is that there are basically four types of crowdfunding: equity, lending, rewards and donation, although some people include the last two into the same category.

  • Equity – those people who decide to invest receive ownership in the organization or company in return for the money invested.
  • Lending – or also known as debt, peer-to-peer or peer-to-business. This method implies for the investor to lend money and in return, they receive interest. However, the investor, in this case, is not the bank, but normal individuals who want to contribute to the funding.
  • Donation – as it can be deducted from the name itself, in the case of donation, the investor simply offers money without receiving anything in return or maybe only a tax receipt. This can also be known as charity.
  • Reward – as it was previously mentioned, some people include this method of funding and the donation form into the same category. However, compared to the donation method, raising funding through the reward method implies that the investor receives something in return for the money invested. Some common rewards might be a printed t-shirt, a VIP tickets to a concert, or various other pre-sale products.

The best type of crowdfunding to choose

Choosing the type of crowdfunding depends on various factors. For example, the best methods for individuals who want to fund a project are rewards or debt. In case of non-profit organizations, donation might be a better option, whereas for small businesses all types can be used. Equity is mostly recommended for bigger businesses.

Choosing the online platform

It is important to know that for each type of crowdfunding there are numerous online platforms from which people can opt for the one that best fits their needs and interests. It is recommended to do some thorough research before choosing the platform that best matches your needs.