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What are Crowdfunding benefits?

Crowdfunding is a method of raising money/capital through the efforts of family, friends and investors. Read more about the topic to prepare general awareness section of bank exams.

Mar 2, 2016 09:10 IST
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Crowdfunding is a method of raising money/capital through the efforts of family, friends and investors. The pool of individuals can be formed via social media and other platforms for extensive exposure and reach. It has emerged as the alternative finance that is far different from the conventional financial system.

There are three major players in this model.

i. Project initiator - Who proposes the ideas.
ii. Supporters - The group of individuals who supports the idea.
iii. Organization - It is responsible for launching the idea.

Types of Crowd funding:-

There are primarily two types of crowd funding—

a. Rewards Crowd funding: - Entrepreneurs/company pre sell a product or service to launch a business concept with bearing debt.

b. Equity Crowd funding: - In such funding, investor receives shares in company in exchange of invested money.

Apart from the above, there are several methods too in the respective context—

i. Charity crowd funding: - it is the collective effort to help the helpless individuals.

ii. Litigation crowd funding: - It is related to investment in legal disputes.

Benefits of Crowd Funding: -

i. Reach- to thousands of creditors who can interact with, invest and participate in your fundraising campaign.

ii. Concept Validation: - Presenting concept before potential investors affords you an excellent opportunity to validate and refine your offerings.

iii. PR & Marketing: - From beginning to close, you promote on internet through social media & other means which helps you to connect with different persons that may prove progressive for fund raising.

iv. Presentation: - By creating such campaign, you can look after the business from top level to the lowest.

v. Efficiency: - Efficiency in crowd funding context reflects the ability to centralize and streamline your fundraising efforts.

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