In today’s economic condition throughout the world it is not easy to arrange large funds for any project from fewer investors. Even the father is not ready to invest on sons project blindfolded as it was few years back. Every investor, whether he is your father or a third person, is smart today. No one would like to invest in your project without knowing its pros and cons. It has made it difficult to arrange funds for any dream project but not impossible. A new concept of crowdfunding has recently evolved to fulfill your dreams. Brief information about this new concept is provided in this write up to understand it more precisely.
What is crowdfunding?
Crowdfunding is a process of funding a venture or project by raising small amounts of money from a large number of people within few days, mainly through the Internet. Awareness about this concept was promoted by a number of filmmakers, artists and musicians when they raised funds for their projects through crowdfunding. The idea of crowdfunding can support three types of persons:
1. The initial proposer of an idea or project
2. The supporter individual or group of an idea or project
3. An organization or platform that launches an idea by bringing the parties together
In crowdfunding neither commercial viability nor racing viability of the idea is important. People have raised crowdfunding for their political career, buying racing cars, printing books and even for financing disaster relief campaigns. What is important for raising funds through crowdfunding is that the project should be well pitched otherwise people will not pay for it.
Who can invest in crowdfunding
Investors of crowdfunding can ne divided into three categories. First category investors are those who invest on the basis of some reward. They invest to get substantial reward from the project even if no financial return is involved in the project. The investors of second category include peer-to-peer contributors who invest in the project for some specific cause and expect to get their money back with some interest. The third category of investors in crowdfunding includes people who fund the project on the basis of equity. They fund the startups of the project and get equity on it.
Investors may get a little or nothing in return of their money in the beginning. They may get a thank you note from the crowdfunding sourcing platform or discount offer from some photo printing platform at the most. In fact the investors normally do not expect any return on their investments in such project as they have funded their relatives or friends or an idea they believed in.
According to various researches it has been proved that more than 30% of the crowdfunding is done to known and trusted people and upto 25% funding is done for the completion of the projects they have ever dreamt of. According to SEBI at present 50% of the market is being crowdfunded on the basis of reward as per their guidelines.
Thus crowdfunding can help you in fulfilling your dreams even if you do not have a commercially viable idea.