Crowdfunding is a method of raising capital from a large number of people. Family members, workmates, friends, corporations and potential investors form part of the target group when raising the required amount. Through the online platform, the initiator proposes the idea on a select crowdfunding platform and interested parties support the idea through contributions to raise the required capital.
The Rise or Origin of crowdfunding Firms
Origin of GoFundMe
Founded in 2010, GoFundMe was initiated by Damphousse and Ballester in 2008 as a website under the name “CreateAFund”. Within the two years, upgrades and developments were made to allow members to offer a full description of their projects including the amount required. The platform allows users to share projects on social media and email links as well as other valuable crowdfunding tips hence increasing their reach for target audience.
Origin of KickStarter
With American roots, Kickstarter was launched in 2009. In 2010, the website managed to raise over $10 million when it was named as one of the “best inventions of 2010”. Its operations started rolling out projects outside America in 2012 giving it presence in United Kingdom, Australia, Canada and Australia among other countries. Kickstarter iOS app for iPhones was created in 2013 making it the first crowdfunding platform to use the mobile platform.Like GoFundMe, the platform offer a wide range of crowdfunding tips for their users.
How to start a crowdfunding campaign
Unlike the traditional methods of raising capital, crowdfunding is easier, faster and cost effective way to raise the initial amounts. Essential crowdfunding tips for a successful campaign include:
• Ensuring availability of adequate information to convince potential investors. Uploading photos, videos and detailed information provide the audience with a deeper insight.
• Choosing a platform that allows fast and efficient communication platform. It is on this platform that potential investors pose questions seeking answers and clarification on the project.
• Giving regular updates on the progress of the project. Potential investors require constant and regular updates on any changes to the original concept.
• Social media presence is important to reach a wider population and create awareness.
Choosing the best type of crowdfunding
There are three main types of crowdfunding. Choosing the ideal type depends on the type of product or service on offer and the target growth of the project. These include:
Donation based crowd funding does not offer any form of returns on amounts invested. It is an ideal way to raise funds for humanitarian undertakings such as medical assistance, charities, and disaster relief.
Reward based funding provides a promise for a gift or reward in exchange for the contribution. Contributors may receive a promise for the products once the production process is done. It is ideal for new starters as it offers an opportunity to raise capital without giving away the stakes of the project.
Investors in equity based crowdfunding become partial owners of the project. They are entitled to a share of profits from the project. Amounts contributed are termed as shares and used as the basis to compute rewards.
Origin of crowdfunding brought about an avenue to raise capital without the hassle of the traditional methods. Potential investors are always on the lookout to identify prospective income generating projects that will give them values for money invested. This ensures a steady and promising resource for inventors and other projects that require funding.
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