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Crowdfunding: a way of raising money to finance projects

Updated: Jun 26, 2023

A Group of participants attending Project Management and Fundraising Training learned and understood key aspects of Project Management and Fundraising and developed further interest in fundraising. They identified one of the fundraising methods i.e., Crowdfunding – taught in the training as their primary fundraising tool to raise funds for their mission work by 2020 onwards. Now, they are regularly (quarterly basis) raising £3,000+ for their various mission needs. They also applied other fundraising methods but Crowd Fundraising is the central pillar in their fundraising strategy. The global crowdfunding market size was estimated at £1.67 billion in 2022 and is expected to reach £1.88 billion in 2023. The global crowdfunding market is expected to grow at a compound annual growth rate of 16.7% from 2023 to 2030 and to reach £5.53 billion by 2030.

What is crowdfunding?

  • Raising financial resources from a large number of people who contribute a small amount through the internet.

  • Putting a request for financial support to a group of people.

  • A ‘crowd’ funds a project or business, rather than one or two individuals or funding agencies.

  • Acquiring financial support without the traditional fundraising methods or means.

  • Lots of individuals sharing small amounts of money to support a project or business.

  • Allowing an individual or business to talk to thousands of people through the power of the internet.

Crowdfunding concept is ancient and prevailing across the globe but the past decades shaped modern day crowdfunding. In earlier times, families, friends and neighbours financially supported the concepts or business ventures of an individual or group of individuals with whom they were familiar with. The first crowdfunding was recorded in 1977. A British rock band collected funds of $60,000 for their United States tour from their fans online. ArtiShare became the first dedicated crowdfunding platform in 2000. Subsequently, more and more crowdfunding platforms have emerged globally and the crowdfunding sector established and is steadily growing. The United States of America passed a law in 2022 named the Jumpstart Our Business Startups (JOBS) Act also known as the crowdfunding bill. The Fundable platform launched in 2012 to support entrepreneurs fund and grow their business through rewards and equity crowdfunding. Crowdfunding is used for businesses, charities, clubs, communities, individuals, investments, political and social movements and start-ups.

Types of crowdfunding:

There are four different types of crowdfunding: Debt, Donation, Equity (lending) and Rewards. Donation based crowdfunding is the most popular fundraising process. It is crucial to have the attention of a large number of people to raise money for something they care about to ensure the crowdfunding campaign is successful.

  • Debt-based crowdfunding – Investors receive interest in return for the funding provided.

  • Donation-based crowdfunding – Money is used to support a charitable project or sponsor an individual.

  • Equity-based crowdfunding – Investors receive equity in the business in return to the investment provided.

  • Rewards-based crowdfunding – Investors receive some kind of reward in return to the investment. The reward may be tangible or intangible.

How crowdfunding operates or functions?

There are a number of online crowdfunding platforms on which project or business can start to raise funds for their work or venture. Crowdfunding platforms are websites that enable interactions between the fundraisers (project or business) and the crowd (general public or investors). Financial support is made and collected through such platforms. There is a fee to use these crowdfunding platforms. The crowdfunding platforms generally provided a secure and easy way to use their services. Many platforms operate an all-or-nothing funding model – if the project or business does not reach their funding target, everyone gets their money back. Most crowdfunding sites have specific rules. It is advisable to carefully study the crowdfunding platforms and take appropriate decisions before launching crowdfunding.

Crowdfunding platforms (websites):

The best way to search for a suitable crowdfunding platform is to research online, study them and match with your needs and then start raising funds for the project or business. It is ideal to read the crowdfunding platform rules and regulations before choosing a platform for your project or business so one does not have to halt the fundraising campaign before the event starts. Crowdfunding is not easy or free to raise the required funds as it necessitates a lot of hard work and time. Here are four of the top crowdfunding websites.

  1. LendingClub: (debt-based crowdfunding)

  2. GoFundMe: (donation-based crowdfunding)

  3. Kickstarter: (reward-based crowdfunding)

  4. Indigogo: (reward-based crowdfunding)

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