Crowdfunding 101

Crowdfunding is a platform that gives individuals the chance to raise funds for their projects or new business ventures from the general public. Learn the basics here.

what is crowdfunding

You've probably read many stories of people raising thousands or even millions of dollars online through crowdfunding. But what exactly is crowdfunding? Crowdfunding is a platform that gives individuals the chance to raise funds for their projects or new business ventures from the general public. You can make use of your networks of family, friends, and colleagues to spread the word about your business or projects to attract more investors. This is often done via various internet platforms (websites) and also social networks (Facebook, Twitter, Linkedin, Pinterest).
There are 2 Main Crowdfunding Models:
1) Donation-based crowdfunding which is technically asking a particular crowd to donate to your project in return for products, perks and rewards (non-monetary)
2) Investment crowdfunding consists of equity-based crowdfunding and debt-based crowdfunding. Equity-based crowdfunding asks a crowd to donate in exchange for equity while for debt-based crowdfunding, it is in exchange for interest or financial return in the future.

What are some useful websites for crowdfunding?
While there are hundreds of crowdfunding websites, it is important to note that not every one of them have real communities and can lead to successful funding. Here are some with proven track records :

  • Kickstarter: Perhaps the most famous crowdfunding website, Kickstarter specialises in donation-based crowdfunding and has a strong focus on creative projects, from films, games, and music to art, design, and technology. Since their launch in 2009, 6.5 million people have pledged over US$1 billion dollars that have been used to fund 65,000 creative projects. Indiegogo is another popular donation-based crowdfunding platform.
  • Crowdfunder: Crowfunder helps to connect entrepreneurs with investors around the world to help fund their business. They provide an avenue for raising investment and also one of the largest and fastest growing network of investors.
  • Fundable: Entrepreneurs create over 6 million new businesses each year in the United States, and yet only a fraction receive funding. Fundable has set out to change that by creating a business crowdfunding platform that enables companies to raise capital from investors, customers, and friends. In their first year, Fundable generated over $80 million in funding commitments from investors, customers, and friends.

With Fundable, entrepreneurs are provided with hands-on service. They help companies to understand the fundraising process and how to launch their funding campaigns with steps to guide them through. You also get to choose whether you want to go the rewards route or the share-options route for getting the capital you need.
You can see more crowdfunding sites here.

Success story:
One of the most successful crowdfunding campaigns is that of Pebble Technology. It has raised US$10,266,845 since it first started its campaign on KickStarter in May 2012 for their Pebble smartwatch that is compatible with Android and iOS devices. Pebble receives critical notifications on your wrist, giving you immediate access to what's most important. It can also act as a remote controller for the phone, or for cameras such as the GoPro. As of February 2014, the Pebble app store had over 1,000 applications. It estimated that Pebble sold about 400,000 smartwatches in 2013, and is on track to double its revenues in 2014.

You can see more crowdfunding success stories here.

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