Crowdfunding 101

crowd·fund·ing | kraʊd ˈfʌndɪŋ | n. the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.

The concept of crowdfunding is quite simple. You’re asking a crowd of people to individually donate a certain amount of money for a specific and compelling cause or project, frequently in exchange for various “rewards”.

Crowdfunding Categories

  1. Equity-based Crowdfunding
    is asking members of a crowd to donate to your business or project in exchange for equity (ownership shares in your company, they become shareholders). For more information, visit Equity Crowdfunding.
  2. Reward or Donation-based Crowdfunding
    is asking members of a crowd to donate to your business, project or cause in exchange for tangible, non-equity/cash rewards such as a t-shirt, invitation to a launch event, the finished product or a simple thank you. Well-known examples of this type of crowdfunding include the Coolest Cooler, Pebble Time Smart Watch and Exploding Kittens Card Game. For more information, visit Reward Crowdfunding.
  3. Debt-based Crowdfunding or Crowd Lending
    is asking members of a crowd to donate to your business or business project in exchange for specified financial return and/or interest payment at a future date.

Of course, the reason why Crowdfunding even exists is the wonderful reach and scale of the world wide web. Connectivity is now in the millions, the world is your forum, but it takes a little more than posting pretty pictures to effectively fund your big idea. There’s still a significant amount of work and strategy involved in conducting a successful campaign.

For Crowdfunding investors, even if a campaign is successfully funded, the management of the “funded company” is now tasked with executing the business plan to the point of sustainability, and if not, caveat emptor.

For more information on Crowdfunding, or to discuss how we may assist with your Crowdfunding project, please Contact Us.

Image of many hands putting money into the same box. The box is labeled IDEA.