Crowdfunding is asking a crowd of people to donate a defined amount of money for a specific cause or project in exchange for various rewards. There are three general categories crowdfunding can fall under: Equity, Donation, and Debt.
Equity-based crowdfunding is asking a crowd to donate to your business or project in exchange for equity.
Donation-based crowdfunding is asking a crowd to donate to your project in exchange for tangible, non-monetary rewards such as an ecard, t-shirt, pre-released CD, or the finished product. Debt-based crowdfunding is asking a crowd to donate to your business or business project in exchange for financial return and/or interest at a future date.
- Crowdfunding is useful for a variety of opportunities, whether fundraising for disaster-relief, creative projects, creating a salable product, or creating a startup.
- Crowdfunding platforms allow you to market your project, generate interest, and receive funds.
- Crowdfunding backers can provide useful feedback about your project.
- Once you get a solid base of support, there is no limit to the amount of projects you can fund.
- Exposes your ideas to potential copycats and fraud.
- Platforms may limit the amount of funds you can receive.
- Regulations and taxation can be difficult to work with.