The Ultimate Crowdfunding Definition: What is Crowdfunding?

Crowdfunding is the use of small amounts of capital from a variety of different individuals, either investors or even just normal everyday people. This capital is used to finance either a new business venture or to help existing businesses bring out a new product or service that they have been developing.

Crowdfunding is not a concept that has come out in recent times, actually, an early case of crowdfunding occurred in America, during the development of the statue of liberty. They found that they were short on funds, so renowned publisher Joseph Pulitzer decided to launch a fundraising campaign and was found to have raised over $100,000 from more than 160,000 people.

Through the use of modern technology, the scope of crowdfunding has increased from local investors to global investors and essentially allows anyone to support a business regardless of their location.

They do this through online platforms such as Crowdcube and Indiegogo, which serve as virtual matchmakers, helping pair businesses to a wide variety of investors.

 

The Ultimate Crowdfunding Definition: How Crowdfunding Works?

Crowdfunding has created the opportunity for business owners to gain hundreds of thousands from anyone who has money to invest.

The crowdfunding platforms aim to attract thousands of people in order for them to invest in the next big thing. It provides a forum that enables people to pitch their ideas, regardless of how crazy they may be. Investors can invest as little they want and can choose what type of project they would like to invest in out of the thousands they have on the platform.

When it comes to crowdfunding there are different types such as equity, rewards and donation-based projects.

 

The Ultimate Crowdfunding Definition: How it benefits investors?

Crowdfunding does not only benefit the entrepreneurs aiming to earn funding for their business, it also benefits the investors themselves. Quite a few crowdfunding projects are rewards-based and for investors, this means that they can earn early access to a new product the company may be releasing or receive a gift from the company.

An example of this is Pulp wines who hit their crowdfunding target on Indiegogo in just one day. Instead of giving their backers a share into their business, they were rewarded with wines depending on the amount that they originally invested.

Equity-based projects also have a benefit for investors, as it offers them the capability to earn an equity position in the future. If the project is successful the value of the share goes up, however, the opposite is also true, if the project is unsuccessful then the value goes down.

Conclusion

In conclusion, the main definition of crowdfunding is that companies can gain some sort of monetary value in order to help improve their business. This investment could be used to develop a new product or service, or just to help struggling business gain the extra little push they need to be successful.

However, not all crowdfunding projects will be successful, the best way to be prepared for any crowdfunding project would be with a great pitch and an even greater team.

Do you need crowdfunding support?

We can help. Drop The Crowdfunding Studio are proud partners of Crowdcube and Indiegogo. We assist ambitious businesses in communicating their ideas, products and services with outstanding crowdfunding video production,campaign designcrowdfunding marketing and crowdfunding PR.

To learn more about us and our services, visit our website: drop.studio.

Or book a free phone workshop today and ask us anything, like how to create a successful crowdfunding campaign or how to accelerate your business from zero to fully funded.