One of the most popular recent alternative funding sources is crowdfunding , also known as crowdfunding . It is a creative formula to raise money in order to start some type of project , initiative or company. Do you want to know what it consists of? Who knows, it may be the key to making that dream come true that you have always wanted to achieve and for which you have never managed to gather the necessary financial resources.
What Are We Talking About When We Talk About Crowdfunding ?
The central idea behind this approach is crowdfunding . An entrepreneur, or anyone else, creates a community around his idea, product or service to raise the resources he needs. Why is it so interesting?
According to Wikipedia , the definition of this type of funding is “collective cooperation promoted by people who create a network to get money or other resources in order to finance efforts and initiatives of other people or organizations.” Seen like this, crowdfunding is conceptually wonderful. You can get the money before starting your activity, and it does not require exorbitant return commitments, beyond those previously raised by the person who drives it.
In other words: the contributions are individual and voluntary , sometimes even disinterested, by a group of people or entities that accumulate it until they allow the project to be started. If you think about it, it is a great way to raise the necessary money without assuming large obligations later. And you can apply it to all kinds of initiatives: it is especially common to see it in creative, musical and artistic works. Among them, record an album or shoot a movie. It is also prevalent in social initiatives, political campaigns, business entrepreneurship, and debt refinancing.
The Internet has become the perfect channel to promote and carry out these financing approaches. And the emergence of multiple crowdfunding platforms has been the consequence of this significant boom.
Those websites that allow people from all over the world to offer or contribute money to individuals or organizations that have decided to bet on crowdfunding are known as such . These projects are published in them for a specified period of time , contributions are managed and accounted for, and their status is reported in real time.
There are many today. Some are general, such as Lanzanos.com , Goteo.org , KickStarter , Indiegogo or Coavanza.com . Others are specific to companies and start-ups , such as Sociosinversores.es or MyTripleA . Those aimed at social initiatives or artistic or cultural projects are also common. Microdonations, Miaportation , GoFundMe and Migranodearena.org are good examples of platforms with social intent. For their part, artists and creators use channels such as Verkami.com , Ulule.comor Pentian.com .
You should keep in mind that, for the most part, these platforms charge commissions of between 1 and 7% for their support and services. If you are going to choose one of them, review these terms carefully.
What Does Success Depend On?
The concept of community is understood as a set of people who share values and a vision, pursue similar goals, move and are motivated to act in the same direction. Only if the entrepreneur is able to mobilize and consolidate a sufficiently large and active community around his idea, presenting it in an attractive and feasible way, can the financing be covered.
How Does This Process Work?
Although you can find exceptions and singularities among so many available alternatives, the usual operation is usually identical. Let’s see it.
- You submit your project to the chosen platform to apply as a candidate for funding. You must include detailed and motivating information about its characteristics, required quantity, timeframe, and so on.
- They value your proposal and decide if it is interesting for that specific community or platform.
- Your initiative is published , specifying for how long it will be available to make contributions.
- You will have to promote it to the maximum . The more people are aware of its existence, the more options you will have to receive contributions in the necessary amounts.
- Crowdfunding is closed . Once the deadline has expired, the action ends and the money collected is posted.
- You act accordingly . If the money is enough, you can start the project. If the proposed goals have not been achieved, there are three possibilities: prolong the collection, suspend the project and return the contribution to the donors, or start the idea with less resources than initially foreseen. In general, the general conditions of this collective financing must have contemplated the different models of action.
Types of collective financing
The most useful classification of crowdfunding depends on the type of rewards that the people who contribute their money will receive. Fundamentally, you are going to find five classes.
- Donations . Those who contribute money do not expect to receive anything in return. No type of benefit or consideration. They participate in an altruistic way.
- Rewards . They receive some kind of gratification, not necessarily monetary: appearing in the credits, having a presence on the cover, a limited edition copy of the product or other gifts that identify their belonging to that community.
- Actions . Collective investors receive shares from the financed company.
- Crowdlending . They are, in reality, mass loans that assume a certain interest rate. They will be returned in the defined conditions, as if it were a bank loan.
- Royalties . In this case, the consideration is a participation in the profits obtained.