What is Crowdfunding & How does it Work?

We almost can’t pass through a single month without witnessing the launch of some kind of startup, whether in our local area or across the world. To fully function, some of these startups always require investors and crowdfunding, which are the best ways to pave a successful path for the future of the startup. But what is crowdfunding?

Crowdfunding is a way to help raise funds from a large number of individuals, local or international. A large number of people can pool out small, individual investments to raise the capital needed to grow a new company or idea. The amazing thing about Crowdfunding is that anybody can launch. From big companies to the small ones, charities and individuals can launch a campaign to support any specific causes, and anyone can contribute for support, just like how anybody can decide to play casino games on real money pokies.

There are four types of crowdfunding;

Rewards-based: Where people contributes in return for a reward.

Equity funding: This helps individuals raise funds from the public in exchange for unlisted shares, which is the equity, in the business.

Donation: This is mainly done as a charitable cause, only to support.

Peer-to-peer lending: This is also called ‘debt crowdfunding’ which works in a similar way as taking a loan from a bank. However, you will be getting the funds from an individual rather than a financial institution.

How Does Crowdfunding Work?

Thanks to the advancement of technology, crowdfunding sites have made it easy for an entrepreneur or small startup to launch a campaign and gain a global audience, which will inspire many to contribute and give financial support to the proposed project. Below are the steps you can take to start your crowdfunding campaign.

Pick The Platform You Intend To Use

You can start your crowdfunding campaign by picking an equity-based or rewards-based platform. But before launching, you should research how long the platform allows campaigns to run. It is an important factor. The maximum amount you’re allowed to contribute, and who will take notice of the campaign. Some platforms have a different kinds of investors. And there are some investors that are based on top online casino sites, so you should pick your choice wisely.

Being Accepted By The Platform

Before you can be accepted by platforms, you need to complete the online forms they require along with the documents they need. The platforms need to ensure that you’re legitimate. An offer letter will be required by the platforms if you intend to launch an equity-based crowdfunding campaign. The document will be outlining the terms of the funding, the risk warnings, and cooling-off timeframes for investors.

Presenting The Pitch

Once you’re accepted along with your proposal by the site, you’ll be given the opportunity to create your pitch. Explain the idea of your project along with the reasons you’re raising the money and the amount you need.

The pitching phase always requires some amount of work. You’ll need to come up with some marketing plan to advertise your company or come up with an idea good enough to attract investors. You should also have at least one social media that is actively being used.

Campaign Result

Some social crowdfunding platforms will allow you to collect all the money you received in the campaign when it ends. In other platforms, you have to set a goal you intend to reach and you’ll only be able to get the cash once the goal is achieved.

These platforms earn their money through fees like a portion of the raised funds, which includes the transaction fees. The platforms also accept equity. The fees will not be charged till you’ve achieved your goal on the platforms.

Russell Wilson

Hi, I am Russell Wilson; I am an entrepreneur, father, mentor, and adventurer passionate about life. At this moment, I am working with depression and anxiety.

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