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What is Crowdfunding, and why is it Essential

8/7/2022

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The practice of funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, typically via the internet.
This modern crowdfunding model is generally based on three types of actors – the project initiator who proposes the idea or project be funded, individuals or groups who support the idea, and a moderating organization (the "platform") that bring the parties together to launch the idea.
 
Crowdfunding has been used to fund a wide range of for-profit, entrepreneurial ventures such as artistic and creative projects, medical expenses, travel, and community-oriented social entrepreneurship projects. Though crowdfunding has been suggested to be highly linked to sustainability, empirical validation has shown that sustainability plays only a fractional role in crowdfunding. Its use has also been criticized for funding quackery, incredibly costly, and fraudulent cancer treatments.
 
Types:
The Crowdfunding Centre's May 2014 report identified two primary types of crowdfunding.

Rewards crowdfunding
Entrepreneurs pre-sell a product or service to launch a business concept
without incurring debt or sacrificing equity/shares.

Equity crowdfunding
​
The backer receives shares of a company, usually in its early stages, in exchange
for the money pledged. 
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Companies that Offer Crowdfunding Platforms

Following are the platforms which offer to crowdfund
  1. Indiegogo
  2. Kickstarter
  3. GoFundMe
  4. Patreon
  5. SeedInvest
  6. Fundable LLC
  7. Wefunder
  8. Crowdcube
  9. Seedrs  
  10. StartEngine
  11. RocketHub
  12. CircleUp
  13. FundRazr
  14. MicroVentures
  15. Crowd Supply
  16. Fundly
  17. AngelList
  18. Gogetfunding
  19. EquityNet
  20. Mightycause
  21. OurCrowd
  22. Crowdrise
  23. Ulule
 
How Much Do Crowdfunding Sites Charge?
Different crowdfunding sites charge different amounts. Make sure to read about all of the fees charged by the site before signing up. Sites will typically charge a fee for processing payments, ranging from 3% to 5% per transaction or a percentage of monthly income earned. Some sites might also require that a minimum amount be raised, or else the contributors get their money back, so make sure you'll be able to hit your target.

Which Crowdfunding Platforms Would Be Best?
  • Kickstarter is one of the biggest names for crowdfunding, known for helping tech and creative entrepreneurs fund their projects before getting a loan or raising money for venture capital. The company has raised over $6.5 billion since its inception in 2009.1 Potential funders can browse several verticals from arts and film to publishing.
  • Indiegogo users usually create campaigns for tech innovations, creative works, and community projects. The crowdfunding platform works similarly to Kickstarter, except it doesn't have an exclusively all-or-nothing fundraising model. Users choose between two options: fixed and flexible funding. Fixed is best for fundraisers where your project needs a certain amount of money, while flexible is suitable for campaigns where you'll benefit from any funding.
  • Patreon is popular among digital creatives, such as YouTubers, podcasters, and bloggers. Instead of collecting one-off campaign donations, you have a subscription model where patrons regularly contribute a set amount of money every month or per creation. The site allows artists to form relationships with their fans, and creators can even deliver exclusive content to their Patreon subscribers as an incentive to continue funding them. Suffice to say, this service works best if you regularly share work on your platform. Otherwise, pledgers do have the option of canceling their subscription if creators don't produce content. Patreon offers three plan tiers that take a percentage of the monthly income earned on the platform: Lite (5%), Pro (8%), and Premium (12%). Payment processing fees also vary depending on your chosen plan tier and a patron's payment method. The site boasts over 8 million active patrons and over 250,000 creators.
  • Fund me: You've probably seen a handful of GoFundMe fundraisers on social media at one point or another for emergencies and charitable causes, but businesses can also use it. The crowdfunding site collects a 2.9% processing fee and $0.30 for every donation. As it's not an all-or-nothing fundraising site, you keep everything you raise. Plus, there are zero personal campaign funding fees for those in the United States.
  • GoFundMe has had many successful campaigns, including the Las Vegas Victims Fund ($11.8 million) and the Time's Up Legal Defense Fund ($24.2 million). This site is a good option if your fundraiser goes towards a service-based cause, such as medical needs or emergency relief.
  • CircleUp: If you're building a consumer brand, it's worth looking into CircleUp. It offers equity capital and credit financing and a platform to network with experts, retailers, and entrepreneurs. You can also connect with accredited investors with a net worth of at least $1 million or an annual income of at least $200,000.Other perks include access to particular lines of credit and market insights using Helio, CircleUp's proprietary machine-based learning technology for making company strategies. The company is best for entrepreneurs looking to scale instead of developing their ideas. The selection process is pretty competitive, and typically you also need to have a revenue of at least $1 million to be listed on their site.
 
How We Chose the Best Crowdfunding Sites

We reviewed the most popular crowdfunding sites to narrow them down to our top picks. We selected the best crowdfunding sites based on their features, track records, number of users, type of crowdfunding they offer, costs, and more.
There are ways that companies trying to get crowdfunding can advertise their opportunity to investors. Marketing channels play a vital role in implementing the organizational strategy. Inbound and outbound marketing are based on different methods. Inbound marketing uses blogs, webinars, socials, and paid ads to promote the product/service to a vast audience.
 
Outbound methods include TV/radio, cold-calling, events, and email marketing.
​

For the crowdfunding niche, inbound marketing channels work better; however, emailing is also an excellent way to build the client base.
  1. Referral and affiliate programs
  2. Personal networks
  3. Events and webinars
  4. Organic search
  5. Social networks (LinkedIn)
  6. Content marketing and PR
  7. Influencer marketing
  8. Email marketing
  9. Crowdfunding aggregators
  10. Partnership with a bank
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    Journalists from around the world writing to give you answers, with  Assitant Editor Dr Muhammad Hassan Fayyaz for articles in June and July 2021
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    PictureAdam Cox has traveled the world, started, owned and sold several businesses including a small multi state retail chain, and attended Harvard Business School and is currently pursuing Business Law studies at Cornell while being Editor in Chief of Cox Business News.

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