What is Crowdfunding?

What is Crowdfunding?An entrepreneur has always been seen as a leader, an innovator and a necessary part of the economic structure but in the post-recession world the entrepreneur is almost an urban legend.

Creativity in the world has not ceased to exist, however the funding required to turn creative ideas into businesses has.

The general population are trying very hard to hold on to their money and their jobs and high risk high reward is, at least temporarily, a thing of the past.

Crowdfunding or crowd financing has, arguably, been around for quite some time but it has not had the international exposure that it claims today.

Many startups are flocking to crowdfunding platforms such as Kickstarter and Indiegogo to collect donations for their young ventures.

These crowdfunding platforms all have similar structures and requirements. The entrepreneur’s idea has to be ‘pitched’ to the investors using video or uploaded presentations.

Then if the potential investor is interested, they can donate a certain amount of money in return for an instant reward and a certain ROI.

The size of the reward, naturally, depends on the size on the investment and may vary from a T-shirt to a large share of the business and the percentage of interest depends on the venture. The required amount is also specified and the amount collected is available for the public to see.

The idea behind crowdfunding is rather than getting a large sum of money from few, wealthy individuals, that the business can be funded by a large number of people including the entrepreneur’s personal network of friends and family.

This allows a higher chance of obtaining funds as there is a higher number of interested parties. The platforms are setup in a way that amounts large and small are accepted and rewarded. This encourages any and all capital to be recognized motivating the investor to contribute.

Typically, it is inexpensive to pitch your idea on a website. However, once you have reached your desired target a percentage fee of usually less than 10% will be charged.

Crowdfunding is not limited to startup ventures. Charitable causes have now followed suit and are pitching for donations rather than investments using the same methodology.

Also, individuals have stormed to crowdfunding sites in order to fund artistic projects such as films, novels, comic books and the likes although in these cases investors should not expect their money back.

There are other crowdfunding platforms that are designed for individual goals. For example, there are those who would like to obtain their master’s degree but do not have the funds to do so, others in similar situation would like to attend a dance school that is too steeply priced for their budgets to accommodate.

It is clear that crowdfunding has taken the internet by storm and is here for the long run. Using new technology, entrepreneurs can assist the economy by creating jobs and dreams can be achieved encouraging philanthropy for generations to come.


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