Crowdfunding lets business people present their ideas or inventions on the web so they can have anyone invest in it through online giving. Those who invest or donate can have some type of incentive for their contribution or they can ask for nothing at all. The crowdfunding platforms use technology by letting investors use their credit cards, bank accounts, and electronic cash to invest or donate in the businesses. Countless businesses have been started and inventions have been funded due to crowdfunding.
Although crowdfunding isn’t a new concept, President Barack Obama signed into law the JOBS (Jumpstart Our Business Startups) Act that gave the authority to have crowdfunding businesses that would help other small businesses get their start in 2010. In addition, this act would help to improve the economy for small businesses. Businesses needing start-up capital can find a crowdfunding website and start a campaign to raise money. Take for example of Jason Young. He raised $77,500 to develop a financial literary game called the Mindblown Life when his goal was to only raise $60,000.
There are three types of crowdfunding platform: rewards-based, equity-based, and investment-based. Rewards-based crowdfunding allows businesses to give their contributors some form of reward or even a simple thank you. Rewards-based are generally found online. The most popular websites are Indiegogo.com, RocketHub.com and Kickstarter.com. Some require a video and text explaining products or services and setting a monetary goal on it. Some campaigns require a processing a fee and a time limit to hit the goal. If the goal isn’t reached then all the money will be returned back to those who gave. Equity-based crowdfunding allows contributors buy stock into the businesses. This type of crowdfunding competes with venture capitalist companies, so it presents an option for those can’t find those types of investors. The SEC (Securities Exchange Commission) still hasn’t written any rules or regulations for it yet. Investment-based crowdfunding allows local businesses to invest small amounts from those in their networks and communities. This type differs from equity-based because the investors get small amounts on their return for a specific time period.
Crowdfunding isn’t only used for social issues and for last minute funding efforts like those emergency GoFundMe accounts. New businesses are using it by offering incentives like discounts, pre-orders, recognition, etc., to those who contribute. I recommend Teespring which is a crowdfunding website that allows people to raise funds by creating customized t-shirts. The company handles the orders and the shipping for a small percentage for each order. Many businesses and organizations have been able to get capital to start their ideas.
Now, they are no excuses for anybody who wants to start a business or organization. It’s time to take your ideas/dreams and turn them into reality. For more information, check out How I Raised $10,000 Crowdfunding by Lanee Javet.
