Crowdfunding does not only subsidize cultural or social sectors. The trend now is to invest in more economic sectors. Several flows have made it possible to invest in other economic sectors such as renewable energy, real estate and services. Several funds raised on these sites have made it possible to finance SMEs.
How does crowdfunding work?
Crowdfunding is one of the trends in Crowdsourcing. This approach allows several people to contribute to the financing of a single project. People interested in this practice can consult current projects on certain web portals. This solution allows companies, start-ups or individuals to obtain funds to complete projects. The principle is to use the solidarity of Internet users. The investor is not obliged to go through traditional financing.
These practices make it possible to federate several investors in the accomplishment of a common project. It can be a cultural, economic or specific project. In order to raise sufficient funds, this method of financing makes it possible to obtain significant capital. Fundraising is done by grouping together several small amounts. Fundraising can be done in a variety of ways such as donation, community production, loan and equity.
Importance of crowdfunding to achieve a business project
Participatory financing is an innovative way of raising funds for the accomplishment of a professional project. There are 3 types of crowdfunding. It is important to choose the one that is best suited to the project. By choosing the donation in return, the entrepreneur appeals to the generosity of Internet users by offering them small rewards for their gesture. It can be an invitation to the project launch party, goodies, products concerned by the fundraising campaign… The most creative can encourage future patrons to take part in the project.
Favour lending or equity as a trendy form of financing
A crowdfunding portal allows entrepreneurs to benefit from a loan between individuals or companies. The lender decides which project he wants to invest in, sets the amount, the rate and the repayment term. If the solidarity of Internet users brings together several proposals, the company will be able to choose the offers that seem the most advantageous to it. Equity or equity participation allows to raise funds in order to invest in a company.
The counterpart is that the investors will receive shares in the companies financed. The objective is to put start-ups and business angels in touch with each other. Whatever the project envisaged, it is possible to find a suitable form of equity financing. The main advantage of crowdfunding is that this solution makes it possible to raise funds without asking for help from banks and microcredit companies. The trick is to appeal to Internet users.