Home » BUSINESS AND ECONOMY : CAN YOU RESORT TO CROWD FUNDING FOR YOUR BUSINESS ?
Economy and Finance

BUSINESS AND ECONOMY : CAN YOU RESORT TO CROWD FUNDING FOR YOUR BUSINESS ?

BY ROBIN GHOSH,

ECONOMIST AND BUSINESS MENTOR.

KOLKATA, 22 JUNE 2024.

Yes, you can.

But, before we go forward – let us first understand what is crowd funding?

Crowd funding is an amazing alternative to help entrepreneurs to gather funds from a large number of people through the internet .

In other words, crowdfunding means tapping a large, geographically dispersed audience given the name as ” the crowd” , for a small source of money to fund a project or a venture.

MODELS OF CROWDFUNDING

A quick research indicates that there are many models of crowdfunding – depending upon what is the type of project – you have to choose an appropriate model.

There are many models of crowdfunding.

Let us make a quick survey.

1 Donation Model

Crowd funders do this type of funding for self actualization, satisfaction, and to belong to welfare strata of society. There is no expectation of monetary return.

2 Reward Model

There is a group of crowdfunders who sponsor projects for the benefit of the society in areas like health, environment, training programs. The reward is – in the form of “thank you notes” or a “Tshirt”.

3 Equity Based Model.

This is investment based crowdfunding. Here the investor puts his money in the proposed project and expects share in the venture, dividend, capital gain or voting rights.

4 Lending Based

Model

Crowd funders lend money against interest and repayment of principal or on a revenue sharing basis.

Entrepreneurs and Crowdfunders choose a crowdfunding model according to their needs.

The most elevating factor is – entrepreneurs and project creators – who can not finance their projects by their own money or money from friends and venture capitalists – crowdfunding often shows light at the end of the tunnel.

To conclude:

1 Crowdfunding does not require strong personal relations or ability to pledge.

2 It is an open call, essentially through the internet.

3 You can tailor the model based on win-win conditions.

4 It is indeed an important component of seed funding.

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