Crowdfunding 101 – What does it mean?

Crowdfunding. It was one of 2014’s hottest buzzwords and remains one of 2015’s most lucrative business opportunities. Yet many Brits remain unenlightened as to what it is, how it works and whether or not it’s a worthwhile venture

when launching a new product. To help clear up the confusion we’ve put together a complete Crowdfunding 101 guide to answer all your burning questions…

What is crowdfunding?

Crowdfunding is a fresh way to source investment by raising monetary contributions from a range of contributors. Donations start from as low as £1 and can range up to tens of thousands. It’s usually carried out via the internet using an existing crowdfunding platform such as Kickstarter, Indigogo and CrowdCube. There are two key models of crowdfunding – donation based and investment based. Donation projects see backers pledge cash towards a collaborative goal in return for pre-set rewards. Investment crowdfunding allows businesses to sell ownership stakes in a bid to raise capital. Investors then become shareholders and enjoy financial returns.

Is it worthwhile?

According to the latest Massolution report crowdfunding campaigns raised a huge $2.7 billion in 2012. By 2025 World Bank analysts are predicting that the global crowdfunding market will hit a colossal $90 to $96 billion, which is a figure that’s around 1.8 times larger than the scope of today’s global venture capital industry. So the answer to this question is a resounding YES!

What platforms can I use?

At present there are several crowdfunding platforms to choose from. It’s important to understand that they are all unique and lend themselves to a variety of different ventures. Here are some of our favourites:

  • Kickstarter

    Shining the spotlight on creative projects, Kickstarter is the world’s leading donation-based funding platform.

  • Indiegogo

    From music and new inventions to personal financing and charities, Indiegogo takes them all! Thanks to its flexibility and ‘take them all’ attitude the platform has enjoyed rapid international growth.

  • Crowdfunder

    With a focus on raising equity and debt capital, Crowdfunder boasts one of the world’s fastest growing investor networks. It’s been pegged as by critics as a ‘new breed of crowdfunding.’

  • RocketHub

    This platform hosts donation based funding projects and also features FuelPad and LaunchPad programs which can help to connect campaigners with potential marketing partners.

Are there any success stories?

Yes! When it comes to crowdfunding the business sphere is littered with success stories! FORM1, a next generation 3D printable clothing company raised a huge US$3 million dollars, the ultra-intelligent Pebble wristband Kickstarter campaign drummed up US$10 million, with the first US$1 million pledged in just 28 hours. Kickstarter also hosted the world’s fifth largest project when a bid to fund the Veronica Mars movie raised a staggering US$5.7 million.

Have we convinced you that crowdfunding is the business model of the future?

Other Stage Crowd” by Chris Ford is licensed under CC BY 2.0