What is crowdfunding?

What is crowdfunding? How does it work? What are the benefits for startup founders who use it to raise money for their businesses? In this article, we will answer all of those questions and more. We will investigate what crowdfunding is, and how it has impacted entrepreneurs and entrepreneurial ecosystems. Moreover, provide a guide to and an overview of this type of funding mechanism for new startup founders. Finalise the piece by showcasing startups who have used it with success.
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A brief history of crowdfunding

Crowdfunding has its roots in ancient times. One of the earliest examples dates back to 1714, when British physicist Sir Isaac Newton raised money for his research by selling shares in the Royal Society. In 1884, French author Jules Verne used a similar method to finance the publication of one of his novels.

The modern form of crowdfunding began in the early 2000s, when websites like ArtistShare and IndieGoGo allowed artists to raise money from fans and supporters to fund their creative projects. These platforms were followed by Kickstarter in 2009, which became the most popular platform.  Today, there are dozens of different platforms catering to a wide variety of needs. The most popular platforms are Kickstarter, Indiegogo, and GoFundMe.

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Crowdfunding - what is it?

Crowdfunding is the process of funding a project or venture by raising money from a large number of people, typically through an online platform. It has become one of the most popular ways for startups to raise money and it has been used for a wide variety of projects, including product development, film production, social media campaigns and business ventures.

Platforms like Kickstarter, Fundable, Crowdfunder and Indiegogo allow entrepreneurs to post project descriptions and set a funding goal. If people like the project, they can pledge money to help it reach its goal. If the project is successful in reaching its funding goal, the pledges are collected and used to finance the project. If the project fails to reach its goal, no money is collected and the entrepreneur receives nothing.

It has become a popular way for startups to raise money because it offers several advantages over traditional funding methods like bank loans or venture capital. For one, it allows entrepreneurs to test their idea and get feedback from potential customers before investing significant time and money into the project. Additionally, it can help entrepreneurs build a community of supporters around their venture and generate buzz for their product or service.

Platforms like Kickstarter and Indiegogo have also become popular among startups because they offer a lower barrier to entry than traditional funding sources. Bank loans and venture capital typically require a significant amount of paperwork and a well-developed business plan, while crowdfunding platforms do not. Like any investment, there are risks associated with crowdfunding. For one, it’s important to remember that not all projects receive funded – in fact, only about 36% of Kickstarter projects reach their funding goal. Additionally, it’s important to be aware of the fees associated with the platforms. Kickstarter, for instance, charges a five percent fee on all money raised.

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How can you make your project successful?

There are several things you can do to increase your chances of success. First, make sure you have a well-developed business plan and clear funding goal. Second, create a compelling video pitch to post on your crowdfunding page. Third, reach out to your personal network and ask them to pledge money to your project.

Crowdfunding can be a great way for entrepreneurs to raise money for their startup. However, it’s important to be aware of the risks and make sure you take the necessary steps to make your project successful.

Some of the most famous Kickstarter campaigns include the Pebble Watch, Oculus Rift, and the Veronica Mars movie.

Oculus VR (raised $91 million on Kickstarter):

• Oculus Rift is a virtual reality headset that was acquired by Facebook for $Two Billion. The company raised over $91 million from nearly 11,000 backers on Kickstarter in 2012.

Pebble Technology (raised $20 million on Kickstarter):

• Pebble Watch was a smartwatch that raised over $20 million on Kickstarter from 68,000 backers in 2012. The watch had many features that other smartwatches did not have at the time, such as a long battery life and the ability to be used with any smartphone.

Veronica Mars (raised $5 million on Kickstarter)

• Veronica Mars was a movie that was funded through Kickstarter. The campaign raised over $Five Million from 91,585 backers in 2013. This made it the most successful film project in Kickstarter history at the time.

These are just a few examples of successful campaigns. There are many other startups that have used crowdfunding to raise money for their businesses. It is a great way to get funding from a large group of people. If you are thinking about starting a business, you should definitely consider crowdfunding as an option.

Types of crowdfunding for startups

Equity-based

Equity crowdfunding is a new way of funding businesses that allows startup companies to raise investment from a large number of people through an online platform. In return for their investment, backers receive equity in the company. This type of funding has only become possible in recent years thanks to changes in securities laws.

Rewards-based

Rewards-based is a type of crowdfunding where backers pledge money to a project or business in return for rewards. These rewards can be anything from products or services to equity in the company. The main benefit of this type of funding is that it allows startups to pre-sell their products or services and raise capital before they launch their business.

Peer-to-peer lending

Peer-to-peer lending is a form of debt crowdfunding where individuals lend money to businesses and other borrowers. Peer-to-peer lenders usually do this through an online platform, and they often charge lower interest rates than traditional banks.

Rewards-based

Rewards-based crowdfunding is where people pledge money to support a project or venture, and in return receive some type of reward. This could be anything from early access to the product or service being created, to a physical good such as a T-shirt or mug.

Donation-based

Donation-based crowdfunding is a way of fundraising for a cause or charity by asking people to make donations online. Donation-based crowdfunding platforms usually allow donors to choose how their donation will be used, and provide updates on how the money is being spent.

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Conclusion of crowdfunding

Crowdfunding can be a great way for startups to raise money from a large number of people. There are many different types of crowdfunding, so it’s important to choose the one that is best suited for your business. You should also make sure you have a good strategy in place and do your research before launching your campaign.

If you’re thinking about starting a business, crowdfunding is definitely something you should consider. There are a number of successful startups that have used crowdfunding to get their businesses off the ground. With the right approach, it can be a great way to raise money and bring your business idea to life.

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