New Delhi: Making use of small amounts of capital from a large number of individuals to finance a new business venture or startup is called crowdffunding.
The investment platform invites both investors and fund seekers together through social media and crowdfunding websites.
How it works?
Using this model, any entrepreneur with a robust business model can raise money from the ones interested in making investment.
Crowdfunding provides a forum to anyone with an idea to pitch it in front of waiting investors. Crowdfunding sites generate revenue from a percentage of the funds raised.
Crowdfunding has been used to fund a wide range for-profit entrepreneurial ventures such as artistic and creative projects, medical expenses, travel, or community-oriented social entrepreneurship projects
Two primary types of crowdfunding:
1) Rewards crowdfunding
The entrepreneurs presell a product or service to launch a business concept without incurring debt or sacrificing equity or shares.
2) Equity crowdfunding
The backer receives shares of a company, usually in its early stages, in exchange for the money pledged.
Benefit for Investors
Many crowdfunding projects are rewards-based; investors may get to participate in the launch of a new product or receive a gift for their investment. For instance, the maker of a new soap made out of bacon fat sent a free bar to each of its investors.
