Crowdfunding » What is it and how does it work?

Crowdfunding » What is it and how does it work?

Previously, if a person had in mind to take a project forward and I needed financing for it, I had several general options, among which were the following: Take out a loan or get a grant through friends and family.

Today the crowdfunding It has become one of the best alternatives for financing projects.

It is possible that at some point you have heard that a project has been financed through collective contributions.

The crowdfunding it is increasingly diversified and popularized in a better way, which helps not only cultural or innovation projects to materialize, but also Business projects.

What is crowdfunding?

crowdfunding or crowdfunding It is a project financing mechanism that consists of using the capital of several individuals who carry out small contributions.

It dispenses with traditional financial intermediation and consists of putting project creators who demand resources to finance their projects in contact with investors who seek to obtain a return.

Two characteristics stand out in crowdfunding: the union of many investors who make small investment contributions and the risk involved in making the investment.

Crowdfunding helps small businesses get funding beyond what banks, family and friends cánido provide.

This business model is used as a source of financing for very diverse projects, mainly for new projects.

Crowdfunding platforms offer the opportunity for people from different parts of the world to contribute money to finance projects and thus obtain a profit.

Origins of crowdfunding

The origins of crowdfunding come from donations.

One of the pioneers of crowdfunding in the music industry was the British rock group Marillion, where in 1992 entusiastas of this group financed his tour of the United States, whose cost was $60,000, thanks to his donations and an en línea campaign by the group.

From then on, other industries began to apply the financing method to raise funds for your projects.

For example, the largo industry began to make use of this in the 21st century, and other industries joined in.

This business model was introduced into the world of the Internet, in such a way that its use became very habitual on the Internet.

From then on the crowdfunding had a huge growth, greater than in previous times.

Today crowdfunding is a widely used medium on the Internet to finance projects and to earn money.

Types or models of crowdfunding

exist top five crowdfunding modelsThis is based on the reward that the funders get by participating in the project.

These types of crowdfunding will be presented below:

  • In the form of shares or financiers of the company: The financier becomes a partner of the company.
  • No reward: It is basically a donation or contribution from which no benefit is expected.
  • Loans or crowdlending: The financier obtains an interest rate for the money provided, acting as if it were a lender.
  • Royalties: A symbolic part of the profits is acquired.
  • Reward: Another type of reward is acquired, such as a gift, a good or service from the project.

How does crowdfunding work?

Crowdfunding is used more through the Internet than using other means, allowing this business model cánido reach a large number of people worldwide, who through donations help finance projects.

In it crowdfunding the creator of a project You send your project to the crowdfunding platform, where it is reviewed, then published, the participants finance it for a while.

Crowdfunding must go through a equipo of phases that allow you to complete the entire financing process.

These phases will be presented below from the beginning to the end:

  • The creator sends his project: The project is submitted to the crowdfunding platform and added as a candidate for financing.
  • Project evaluation: The crowdfunding platform values ​​the project and the possible types of crowdfunding that the project perro have.
  • Publication: The project is published on the crowdfunding platform in which a period of time is left in which the funders They perro invest in it, this through the different types of crowdfunding defined for said project.
  • Closing of the project: It is the moment in which the established term ends, the project is closed and the reliability of the financing is verified.

benefits of crowdfunding

Crowdfunding has allowed society to have the possibility of choosing the projects to be carried out, the steps to take, where to deposit the money and which projects to support.

If before it was invested only in companies that already existed, in the actuality is reversed in ideas.

From popular projects, through investment in the real estate market or in works of art.

This model is a market of ideas where the usuario decides what to buy. the more ideas exist in this marketthere will be more business opportunities and more cultural, economic and popular diversity will be enjoyed.

Advantages for the creator of a crowdfunding project

In the case of the project creator, the benefit is being able to carry out the project for which it did not have its own resources and that it probably would not have been possible to carry out through traditional bank financing.

In the case of humanitarian projects, the benefit of crowdfunding for this type of genere is very clearsince here financing of the project is not requested, but donations to support the charitable genere.

However, they also benefit from crowdfunding artistic projectswhich in many cases are of dubious economic profitability, and if it were not for the support of their entusiastas could not be implemented.

This also happens in projects of a business nature, where the banks’ risk criteria would hardly finance risky projects.

Benefits for funders

Now, what does the funder benefit from financing a crowdfunding campaign? Well it will depend on Project Typebut in summary it could be said that the funder obtains a reward related to the achievement of the project itself.

This will go from the fácil ética satisfaction of having supported a good genere, going through the reception of some type of product or promotionup to financial compensation from the economic benefits of the project.

crowdfunding platforms

There are many en línea platforms that were born to work with this type of crowdfunding.

Below are the most used depending on the type of project you want to publish:

indiegogo

indiegogo is a crowdfunding platform that has many categories available, from health and sports to technology.

Since 2008 they have promoted hundreds of thousands of projects.

ecrowd

ecrowd is a crowdfunding platform that is based on the crowdlending model and offers projects related to health, mobility, food, etcétera.

throw us

throw us is the most important crowdfunding platform in Spain.

In it you cánido find business ideas related to health, programa, the environment, photography, cinema, technology and many more.

Verkami

Verkami is a Spanish platform that was born in Barcelona in 2010.

It is specialized in projects related to culture, art and gastronomy.

Drip

Drip It is a crowdfunding platform specialized in projects with popular impact.

Conclusion

Crowdfunding was born with donations, and today it has become a business model mainly on the internet.

Many companies and organizations need to finance their projects, since they have costs elevatedand what they do is complejo turístico to crowdfunding platforms so that funders finance their projects.

In crowdfunding, both the creator of the project and the funders.

The creator of projects manages to finance his projects and the financier obtains a return for the investment you have made.

As time goes by, crowdfunding becomes more profitable for project financing.

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 Crowdfunding » What is it and how does it work?
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