Crowdfunding – What is it?

Crowdfunding – What is it?

Using a crowdfunding campaign as the method to secure funding for entrepreneurs and startups has gotten a great deal of traction and media attention. Since we have experts in Crowdfunding on hand, we thought we’d pull the curtain back and give you a realistic look behind the curtain. This is the first article in a series of articles to help educate you about crowdfunding.

This article is meant to give you an idea of what crowdfunding is, and the different types.

What is crowdfunding?

Basically, it’s using that great following you spent months developing on Social Media, on your blog and newsletter to finance your next level of growth.

Crowdfunding is asking the general populace to fund a project. It is connecting directly with the consumers – the crowd – that will be most interested in helping you make your project (dream) come true. The project can be an idea in its inception form, a product, charity, artistic venture, new buildings, paying medical bills – you get the idea, pretty much everything! A startup with a great social media base and followers can really reap the benefits from a crowdfunding campaign.

Different from traditional lending, crowdfunding has no middleman. You bypass the loan officer of a traditional bank loan, and the bypass the Angel and Venture Capital groups. Instead you tap directly into the people who have followed you and believe in what you are doing.

There are several types of crowdfunding; Donate, Reward, and Equity. Donate, is just that, a donation for your cause. Many of the Donate programs do not offer anything in return other than a feeling of helping a cause.

Reward campaigns offer a reward based on the dollar level of support to encourage people to fund the campaign. Companies, artists, and individuals offer Reward campaigns.

The third type, Equity crowdfunding, is used by businesses and startups, and offers a piece of the company in exchange for funding. This type of campaign is tightly regulated, but recently has been opened to the average citizen, instead of limiting to ‘accredited investors.’ This means the pool of potential investors just became huge – if you want to give up some of your company!

If you need funding for your idea, service, business or cause, crowdfunding can be a viable option, but it’s not right for every business. Our next article will look at the pros and cons of this type of funding!

If you would like to learn more, check out our events page  for upcoming webinars that discuss funding and as well as crowdfunding! Or, better yet, purchase The Simple Secrets of Crowdfunding  to really get the knowledge you need before you launch a crowdfunding campaign!