Winning Strategies for Crowdfunding
Background
Crowdfunding is the practice of funding a project, venture or initiative by raising small amounts of money from a large number of people, usually through the internet. This project, venture or initiative could be a nonprofit, political campaign or start-up company.
Crowdfunding began as an online extension of traditional financing by friends and famil ywith the objective of pulling money to fund members’ business ideas. It takes advantage of crowd-based decision-making and innovation, and applies it to the funding of projects or businesses. Using social networks, social profiles and the viral nature of webbased communication; individuals and companies have raised billions of dollars in debt, equity and donations for projects.
How Crowdfunding Works
The first successful crowdfunding occurred in 1997, when a British rock band funded their reunion tour through online donations from fans. Inspired by this innovative method of financing, “ArtistShare” became the first dedicated crowdfunding platform in 2000. Shortly after, more crowdfunding platforms began to emerge, and the crowdfunding industry has grown consistently each year.
Crowd funding became widely adopted as a result of the 2008 financial meltdown; largely because of the difficulties faced by artisans, entrepreneurs and early-stage enterprises in raising funds. With traditional banks less willing to lend, entrepreneurs sought other legitimate means of raising funds. There are broadly 4 types of crowdfunding:
- Donation
- Reward
- Equity
- Debt
