CrowdFunding

Raise money to support your goals

Introduction

Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people. Crowdfunding is a form of alternative finance, which has emerged outside of the traditional financial system.

The crowdfunding model is based on three types of actors: the project initiator who proposes the idea and/or project to be funded; individuals or groups who support the idea; and a moderating organization (the “platform”) that brings the parties together to launch the idea.

Details

  • Rewards-based

Reward-based crowdfunding has been used for a wide range of purposes, including motion picture promotion, free software development, inventions development, scientific research and civic projects.

  • Equity

Equity crowdfunding is the collective effort of individuals to support efforts initiated by other people or organizations through the provision of finance in the form of equity.

  • Debt-based

Debt-based crowdfunding also known as “peer to peer”, “P2P”, “marketplace lending” or “crowdlending”. Borrowers apply online, generally for free, and their application is reviewed and verified by an automated system, which also determines the borrower’s credit risk and interest rate. Investors buy securities in a fund which makes the loans to individual borrowers or bundles of borrowers. Investors make money from interest on the unsecured loans; the system operators make money by taking a percentage of the loan and a loan servicing fee.

  • Litigation

Litigation crowdfunding allows plaintiffs or defendants to reach out to hundreds of their peers simultaneously in a semi-private and confidential manner in order to obtain funding, either seeking donations or providing a reward in return for funding. It also allows investors to purchase a stake in a claim they have funded, which may allow them to get back more than their investment if the case succeeds.

  • Charity / Donation

Charity crowdfunding is the collective effort of individuals to help charitable causes.

The success factors for a crowdfunding campaign are a complex set of interdependent drivers that can be categorized into 4 main groups:

  • the platform characteristics
  • the campaign characteristics
  • the communication efforts and
  • the investment case (only for equity and lending)

Some key success factors are:

  • Start off with a Great Plan, meaning a “tangible” and  realistic goal
  • Use a Video to Tell Your Story or Demonstrate your Product
  • Create a Dedicated Social Media Strategy
  • Nurture your communities and potential investors throughout the whole process
  • Reward your Investors
  • Prepare to Make Adjustments if necessary

360 Approach

  • Define Crowdfunding goals and target audiences
  • Create specific communication plan
  • Open crowdfunding platform
  • Collect feedback for necessary adjustments