What is Crowdfunding and Power of Crowdfunding for Startups and Business

Wikipedia of Finance - e-learning course on Crowdfunding Wikipedia Chapter - Power of Crowdfunding and Fundraising

Crowdfunding Definition:

Crowdfunding is the “financing of a project or an enterprise through many small contributions from many people, typically via the Internet”. Usually, crowdfunding projects are organized on the Internet. In most cases there is a defined minimum amount in advance that has to be achieved in a pre-loaded period, so that the project is realized. If the desired amount is not reached, the supporters get their money back.

If it succeeds over the crowd to finance the project, the supporters usually get something in return from the project initiator, which may take the most diverse forms. This can be a financial contribution, for example, a public personal thanksgiving, an exclusive glimpse behind the scenes, for example the project results or commercial projects. In order to finance a project through crowd, there are now a number of platforms through which payments can be handled. The benefits and opportunities of crowdfunding and fundraising are manifold. When it comes to crowdfunding, in addition to the financial aspect, there is also often an emotional involvement in the project.

How the Entrepreneurs from World are Getting Funding for Their Unique Ideas?

Do you have a unique business idea that can have a social impact but aren’t able to initiate your project due to lack of funding? Well, seems the idea of crowdfunding has been invented for the entrepreneurs like you only.

The Power of Crowdfunding:

Many projects fail because of lack of funding although the result would be socially desirable. The mechanisms of the market fail in particular in social, cultural, very visionary and very science-intensive projects. Government funding associated with bureaucracy, pulls off the energy of the project initiators of their actual task. It is also expected that many projects to actual social needs may be over promoted (waste of resources), under promoted or not promoted (waste of potential) by the central distribution of subsidies.

The project promoters via the Internet platform contact for the crowdfunding directly to the public, to present their projects and gain maximum people interested in a community. This group of interested parties, whose financial contributions of mostly small sizes, forms the “crowd”, which allows the realization of the project. Supporters receive a consideration that can take the most diverse forms, it usually as a public personal Thanksgiving, an exclusive look behind the scenes or in cases where the result of the project is commercially marketed, sometimes even a financial participation should be.

A crowdfunding project is only realized if enough supporters have found themselves, who were inspired by the idea and the target sum is reached. Thus, the actual social needs are targeted as State subsidies or classical forms of financing could be this. The supporters can be integrated in the construction phase of the project as input or in the phase of marketing as multipliers. As a result, the project is needs-driven designed and marketed. It involves more than the classic transaction of money for services. The donor is emotionally involved in the project. And also the initiator of the project gets far more than the monetary value of the collected money, namely a leap of faith and the support by a group of supporters from the crowd. Crowdfunding creates genuine added value project initiators and supporters, neither side gets something free. Fundraising from crowd is based on the market principle.

Crowdfunding offers a high level of citizen participation, transparency, and low distribution costs. It has established itself as a financing tool for areas where other forms of finance are not working and hence is ideal for all the projects that many people find worthy of support, which can be financed via the classical methods of financing only on favorable terms. Approximately for a new music video, an election campaign, a new business or product, and of course in particular – for renewable energy projects.

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0 thoughts on “What is Crowdfunding and Power of Crowdfunding for Startups and Business”

  1. Wow that was unusual. Phenomenal breakdown of the topic, you should write for me too! just wanted to say great blog!

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