The Top 20 Blockchain start ups / ICO’s all used crowdfunding and raised several Billion dollars within months of release.
Crowdfunding is gaining a lot of traction lately and is considered a solid option for alternative fund raising / financing by companies and lately individuals to raise millions.
Through the evolution of technology and Fintech, online crowdfunding platforms have emerged bridging the gap between investors, startups and IOP’s.
Simply put, crowdfunding involves raising funds from the general public, mainly through online platforms and social media.
There are many different types of crowdfunding business models. The crucial relationship with the crowd is between the business or person raising the funds and their supporters.
It comes in many shapes and forms, from funding via donations, to equity, co-operatives, syndicates and debt investments.
The 4 Main Types of crowdfunding Plus 1 new one
There are different crowdfunding options to choose from. Each type has different benefits for businesses and investors. You will need to consider which one is right for your business, project or venture.
1. Reward crowdfunding
Reward crowdfunding allows investors to contribute to your venture in return for non–financial benefits.
This type of funding is commonly used for creative projects. It usually operates as a teared system – the more an investor donates to your fund, the greater the reward they will receive (eg credits on a record cover, tickets to an event, free gifts etc). A benefit to the business is that the reward doesn’t usually cost much to deliver.
2. Debt crowdfunding / peer to peer
Debt crowdfunding provides investors with the chance to fund your project in exchange for financial interest on their investment.
This finance option may provide you with borrowing at a lower cost than that offered by applying for a loan through a bank. The advantage of this model is that it may be easier to win support for a campaign, as the backers are attracted to getting a return.
This type of crowdfunding may work best for businesses with a track-record of revenues.
3. Equity crowdfunding
An equity crowdfunder will invest money in return for shares, or a small stake in your business, project or venture. This type of crowdfunding could work best for growth-focused companies in areas where there is potential for return.
4. Donation / Social crowdfunding
This type of crowdfunding is suited to charities and individuals, or those who raise money for social or charitable projects, to gather a large community online and to enable 1000’s of individuals to donate to a project / cause.
While most established charities coordinate this through their own website, crowdfunding platforms can be useful for smaller organisations and individuals raising money for personal or specific charitable causes.
With all the above crowdfunding models, all the funds go to one person or entity, all crowdfunding platforms charge fee’s of between 5% to 20% they also impose time limits, funding limits and sometimes many conditions.
One man on gofundme who desperately needed a new car asked for $25,000 and received over $350,000 from over 13,000 people, after the story went viral.
The New Kid on the Block (The Disrupter)
Co-operative crowd funding is unique in that the givers become receivers also. (paying it forward) The donations are unconditional and tax deductible (seek advice on this from a certified account) No time limits, the amount of donations that can be received are virtually unlimited and are ongoing, so long as the participant stays active within the co-operative.
100% of the donations are immediately distributed through to the co-operative participants; one donation is distributed to many.
When you make a donation you are automatically included in the co-op and are eligible to receive ongoing donations from the co-operative.
The fact that all people that donate can become recipients of an unlimited amount donations through the co-operative pretty much can 10X’s the 4 main types of crowdfunding through its co-operative system.