With more and more alternative ideas for financing projects, entrepreneurship is scaling new heights. Crowdfunding is one such alternative scheme for raising funds for indigenous projects, in fact it is termed as one of the best available option in the market. This article gives a brief introduction to the concept of crowdfunding followed by why crowdfunding should be a preferred way to finance projects?
Crowdfunding – A Quick Introduction
Crowdfunding- as evident from its name,means funds from a crowd or a group of people. These people fund the projects in some trade-off. This Trade-off classifies crowdfunding in to two kinds: Rewards based crowd funding and Equity based crowdfunding.
A Rewards based crowd funding is the one in which the funder enjoys the products and services of the company in return for the funds offered.
An Equity based crowd funding is the one in which the investors gets shares of the company in return to the invested sum of money.
The terms and conditions could be well settled by the parties in any way they find best suited. It could be either of the two categories or a mix of both.
Crowdfunding – A wise option for funding
The idea of crowdfunding is simple but the complex part is to propagate the idea of the start-up amongst the lot of potential funders. The latter is facilitated by mediators known by the name of crowd funding platforms. Working through these platforms for crowd funding,the project could be one of the wisest decisions in the course and following points will elaborate the idea.
- Funding projects made easy: A budding entrepreneur might be well aware of the tedious processes followed and conditions applied when dealing with bank loans. In crowdfunding through platforms, there are very minimal processes involved and that too in a paperless, time saving manner.
- A self-introspection tool: A crowd funding idea implemented vide platforms provide popularity index of the idea implemented in the start-up and gives a vague picture of its future performance. Owing to the performance of the project in gathering support over the platform it can be reshaped.
- Lower are the risks involved: The kind of response over a crowd funding platform can be deemed as market survey and hence, can be considered as an indicator of risks involved with project. This helps to prepare better, well before the launch.
- Worldwide Success: Since there is a vast propagation of idea through a crowd funding platform, a lot of people get connected to it as they become a part by funding the project. The success of the project thus becomes a success for many.
This articles definitely clears some air about the roundabouts of crowdfunding thereby giving a deeper insight to the concept and its more than one functionality.
