Crowdfunding is essentially the act of raising money by requesting lots of people for little sums of money.
Imagine you need to fill a large pot with cash. One option is to track down an Angel investor, or high-net worth individual, who pours most, if not all the money in. But angel investors can be hard to find.
Alternatively, you could line up 10 people, 50, maybe even a hundred. They each put a coin in the pot, until the pot is full, and each one gets a share in your new venture – be it a product, business or enterprise of some sort.
Crowdfunding, is therefore great, because everyone wins if the project works out. You fill your pot with the money you need, while all your backers can take part at little expense. Anyone can put money in the pot, so you can look for investors or lenders online, while networking, or even among friends and family.
So crowdfunding is a wonderful thing. And it comes in 3 main types. Let’s go through them:
P2P Lending (or debt)
Peer-to-peer lending, or debt crowdfunding as it’s also known, is a bit like a loan spread around lots of people. The people who invest get their money back, with interest. Why is it great? Well it grants loans to those who want to skip a trip to the bank. It’s also a relatively straightforward process, and can be set up in a jiffy. This is investUP’s main focus.
Examples of Lending platforms are: ThinCats, Assetz and Platform Black.
Reward / Donation
Reward crowdfunding really does what it says on the tin. Each investor receives a small reward based on their contribution, whether it’s a prototype of their product or a unique offer from the fundraiser. This is currently the most popular form of crowdfunding, as often reward crowdfunding campaigns support unique or unusual projects.
The leading Reward platforms are: Kickstarter and Indiegogo. investUP does not feature deals from reward based sites.
Buying shares (equity)
In Equity crowdfunding, investors receive shares or a small stake in the company they invest into. Also there is no guarantee that the investors will get their money back, the long-term returns if the company become successful can be substantial. Equity is one of the most important types of crowdfunding since it is the way a great deal of startups receive initialfunding. investUP has some property equity sites, but does not cater for early-stage equity.
Examples of Equity platforms are: Crowdbnk, The House Crowd and Crowd2fund.
Simon Says 