04.10.21

Crowdfunding

Crowdfunding means attracting the public to finance custom projects. Specialized crowdfunding platforms have the sole purpose: promote promising startups of novice developers and small businesses. Usually, work on such marketplaces is associated with increased risk because all capital must be returned in case of failure.

Funding models and conditions depend on projects. They can attract many people with small contributions or several business people ready to invest big money to support promising startups. We will discuss it in more detail a little later. In general, this is an excellent chance to promote your idea to people, get funding and followers.
Working conditions and types of financing on a crowdfunding platform
The main condition is a good idea. It affects the financing of interesting projects most of all. It doesn't really matter if it is a product, a service, or an animal rights movement. If the idea goes off, the startup receives a powerful financial incentive and goes into development.

But there is a fly in the ointment. Before launching a campaign, you need to analyze competitive offers and social networks and define the target audience. Next, it's necessary to create a detailed financial plan on paper, considering possible risks and changes in the market. The more detailed the plan, the higher the probability of the application being approved. After that, it will be helpful to create a CTA and creative content or examples of a future product.

To attract users, it is also essential to understand what the investor will receive after the project is completed. There can be both a free product and a share in the business. The platform, for example, often takes part of the funds raised as a commission for services. In the case of top investors, they thus buy stocks, guaranteeing a refund and profit if the startup is successful.
Advantages and Disadvantages of Crowdfunding
Despite a tempting idea, getting money out of thin air does not work. There are also risks that can leave the initiator bankrupt and even drive them into debt. But usually, these risks are leveled by the operating conditions of the platform.
Advantages:
Attracting a budget to the project without personal investment.
Widespread publicity and sustained follower support.
If successful, a bright future.
The ability to realize your ideas and ambitions.
The platform's loyalty.
Native advertising.
Recommendations from influential sponsors.
Disadvantages:
Huge competition.
Lack of funding.
Plagiarism of ideas.
Dependence on investors.
Opportunity to "gift" future business to shareholders.
The need to encourage followers.
In total, crowdfunding is a promising offshoot of e-commerce. Of course, there is a risk of failure, but in case of success, the initiator will get worldwide recognition and their own business.
Varieties of crowdfunding platforms
Platforms rarely work with several directions at once. For example, the Kickstarter platform collects funds to support IT projects and scientific startups. Ulule, on the other hand, funds creative projects only. For instance, it raises funds for young performers, artists, and writers. There are also platforms for financing social projects and charitable startups. They usually have no commission and no money-back guarantee. This is due to the non-commercial activities of the founders. As a rule, investors voluntarily pay contributions, guaranteeing themselves only a place on the list of benefactors without a financial gain in the long term.

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