What is crowdfunding?

Crowdfunding is a very new type of funding which takes advantage of the power of the Internet and allows the many people to pool lots of smaller sums of money for a business in which they believe. There are 4 forms of crowdfunding: Reward, Equity, Donation, Debt

• Reward crowdfunding is the most common form. Entrepreneurs solicit financial contributions in exchange for rewards—those rewards could include a thank you note, t-shirt or a discounted product.  Sometimes contributors are paying up front for a product that they would like to see developed—a form of pre-selling. Because there is no financial return promised, securities law do not apply. However, tax laws apply.

  • Popularized by websites like Indiegogo and Kickstarter

• Equity crowdfunding is a relatively new concept where you sell a stake in your business in exchange from an investment from a group of people. You’re pooling money from many people, but it is a very coordinated marketing push to be effective.

  • Popularized by websites like SeedInvest, Crowdfunder, and Microventures.

• Donation crowdfunding happens when individuals donate small amounts to meet the larger funding aim of a specific charitable project while receiving no financial or material return. This method is typically used by not for profit organizations and the funds are typically used for causes like disaster relief, charities, nonprofits, and medical bills.

• Debt crowdfunding happens when Individuals invest in a debt security issued by ithe company, such as a bond.

What are some advantages for crowdfunding?

By using the power of the online community, you can also gain useful market insights and access to new customers.

What are some disadvantages for crowdfunding?

It requires a very coordinated marketing push to be effective, it can be costly and it can require much legal paperwork

Check-out some of our favorite crowdsourcing websites.