Business Funding Solutions: Crowdfunding

By Viktoriia Dorofeieva

In the times of pandemic, when we and our businesses are the most sensitive to the least economic wavering, the help may come from where you could not expect. One of the business funding solutions may come from small investments from the public to support your start-up. And it’s called crowdfunding. 

But don’t confuse “crowdfunding” and “crowdinvesting”. Crowdfunding uses the crowd to test a potential product or service in the form of gathering pre-orders. At the same time, crowdINVESTING focuses on gathering investments for companies that are already present on the market and have high growth potential.

What is “Crowdfunding”?

Crowdfunding is the collaboration of people who voluntarily pool their money or other resources together to support the efforts of other people or businesses. Community funding usually goes through the Internet. Public funding can perform a variety of tasks. For instance, helping disaster victims, supporting political campaigns, financing startups, and small businesses, creating free software.

Source: http://www.thebalancesmb.com/

To start fundraising, the goal must be declared, the cost of achieving it determined. The calculation of all costs and the method of financing must be open to the community in free access.

Public financing can also be used to finance a company by selling small parts of the enterprise to a wide range of buyers. This type of crowdfunding has recently attracted the attention of US officials. In April 2012, US President Barack Obama signed a new law called the JOBS Act. It allows startups to raise to $ 1 million through crowdfunding, without filing securities and registering to sell shares like this used before. 

Ways to approach

An entrepreneur seeking to use crowdfunding usually applies to the Internet community. It’s done to attract small amounts of money from individuals who are not usually professional financiers. The range of variations is quite wide, for example:

  1. Donation. This type of financing has existed for quite a long time, including support for artists and charitable fundraising. Sometimes a donation threshold is used where all donations are canceled if the amount of the donation has not crossed the minimum threshold before the final date of the fundraising.
  2. Public coverage of the name of the donor/grant donor in gratitude for the money provided. The best example is The Million Dollar Homepage.
  3. Crowding (one of the business funding solutions is to crowd finances).
  4. Quasi-shareholders capital. But no such scheme should not fall under any financial provisions regarding the initial public offering.
  5. Investment with share capital. When several parties are involved, it can be a lot of work, so there are platforms to facilitate this.

The most popular crowdfunding platforms in different countries 

Biggggidea, Ukraine 

Aims to develop a strong and open society, to implement the desired systemic changes. The Spilnokosht platform (Biggggidea) raises funds for projects in the fields of education, healthcare, literature, music, journalism, and research.

Wspieram.to, Poland 

The platform for supporting creative people. A place where you can present your ideas that could not be put into practice without the right amount of cash. They provide creators not only with space to present their ideas, but also tools to facilitate their promotion in social media.

Kickstarter, USA

Website for financing creative projects under the crowdfunding model. Kickstarter funds various projects in 13 categories. They are art, comics, dance, design, fashion, film and video, food, video games, music, photography, publishing, technology, theater.

Ulule, France

From 2010, Ulule has made it possible to save money for more than 4900 creative, innovative, or huge projects with 67% of the world’s population. Ulule became the first platform, which allowed taking away a penny of two ways: the project manager can see the amount of money necessary for the real project, as well as to sell the goods (services).

Crowdculture, Sweden

Interesting on this platform is the method of financing. Crowdculture can attract money from both private investors and public funds (part of the country’s cultural budget). The share of public funds depends on the number of votes gained by the project among the platform participants.

Goteo, Spain

This platform is not only for general fundraising for socially important projects but also for their further joint realization. Goteo also has a unique method of financing in two rounds, each of which lasts 40 days. The task of the first round is to collect the minimum amount needed to launch the project. During the second round, the optimal amount of money is collected to improve the project.

CrowdFundMe, Italy

Platform CrowdFundMe is aimed at all those who want to invest in unlisted innovative companies with high growth potential. CrowdFundMe investment is suitable for anyone who believes in a particular company, regardless of whether they are financial experts or not. Both individuals and legal entities (companies) can invest.

Wemakeit, Switzerland

The largest platform in Switzerland for the creative industry. Wemakeit also supports non-profit organizations by funding their projects and helping to develop their communities. Over the past two years, Wemakeit has helped launch 550 projects worth a total of CHF 4 million.

Ulej and Talaka, Belarus

Progressive global trends have also reached Belarus. The Ulej and Talaka allow raising funds for any good cause. But so far the most popular is the social and cultural direction and everything connected with the national and cultural identity.

Planeta.ru, Russia

Internet service for attracting collective financing for the creation of artistic, scientific, social, entrepreneurial, and other business funding solutions.

You can find more about Top-5 ways to invest online.

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