Sourcing funds from institutions with deep pockets and wealthy individuals had always been an issue, especially for smalltime yet innovative entrepreneurs who didn’t even have the resources to make a prototype that’d convince the angel investors to furnish funds. The advent of the internet has somehow eased matters for these hapless entrepreneurs who’ve tapped the various popular automated social media networks to garner financial resources for jumpstarting their stalled projects. This approach where you cast your net wider for soliciting funds is known as crowdfunding.
Going by the crowdfunding method, you showcase your project to a larger group of people or potential investors, and some of these prospective candidates could be individuals you’re acquainted with. The most noteworthy and striking aspect of crowdfunding is that the canvassing or promoting is done solely through the internet. The chances or probabilities of your being able to obtain the requisite funds are better compared to the traditional method where you’ve to struggle a lot before you see a ray of hope.
There are certain distinct advantages that crowdfunding has over the conventional approaches. Firstly, and most significantly, your reach is extensive and across-the-board as you’re able to contact nearly innumerable net surfers and users. Popular crowdfunding sites like ‘Kickstarter’ and ‘Fundable’ connect you with millions of netizens, some of them who might turn out to your future investors. A convenient campaign prepared for this route of attracting funds provides you the opportunity of going through your project all over again and fine-tune it accordingly.
You can publicize your campaign very quickly and across different social media networks at minimal costs. This not only increases visibility which ultimately expedites the process of crowdfunding. There are three basic ways in which you can request for funds via the crowdfunding route-reward or donation, debt funding and equity funding. As per the first approach, you the innovator pledge a non-monetary reward or donation in exchange for the funds you receive. According to debt-funding method, investors advance you a lump-sum against your promise of repaying by paying interest on the sum. Equity funding happens when prospective investors are offered an equity or stake in the company that you’re about to establish in lieu of funds.