Crowdfunding is a new and growing trend of fundraising by individuals, companies, or institutions, typically through the Internet. Funders are generally individuals or groups of people who choose to contribute money in return for incentives such as products, services, or experiences.
One important thing about crowdfunding is that it's not only limited to arts or technology; there are also businesses that use crowdfunding. For example, many small business owners create Kickstarter campaigns to raise funds for their products before they even start production. Some smaller businesses will close their doors without raising enough funds through this method.
There are several different types of crowdfunding: incentive-based, equity-based, donation-based, and social fund. To differentiate between the different types, we can say that the first form involves the financing of a project where investments are paid from incentives or rewards such as products or services. The second type is when funding comes from providing equity in a company. This means receiving stock or shares in the company funders are funding. The third type is when funding comes from donations and grants. The fourth type is when projects are supported through social network participation and sharing content or achievements with others. It can be helpful to know which one you would choose for your project.
It's not surprising that the most successful crowdfunding projects are those that have been funded by the public. These projects will usually be featured on Kickstarter, a US-based website where backers can contribute money but do not receive financial returns. With Kickstarter, funds are raised for a project and will only be received if a specified goal or target is met; if the goal isn't reached, no money changes hands. It has also been reported that Kickstarter has generated over $1 billion USD in pledges since its foundation in 2009.
Some of these successful projects include smart luggage and smart watches. The smart luggage was funded at $3,589,888 while the smart watch campaign was at $10 million with over 30,000 watches sold.
Written by Ishmita Vaish