Crowdfunding – what is it?
The most general explanation for this concept is given to us by Wikipedia:
“Crowdfunding (public funding, from English crowdfunding, crowd -“ crowd ”, funding -“ funding “) is a collective collaboration of people (donors) who voluntarily pool their money or other resources together (usually via the Internet) to to support the efforts of other people or organizations (recipients). ”
Such fundraising can occur both for commercial purposes (support for start-ups and the creation of new companies), and for charitable purposes (assistance to victims of disasters, etc.). In order to take part in crowdfunding as a recipient, it is necessary to clearly formulate the goal of collecting money, indicate the necessary amount and justify all expenses.All this information, as well as data on the current state of fundraising, should be available to everyone (usually this happens on special sites on the Internet).
Crowdfunding began its history a long time ago, and now it is a fairly popular way of collecting money from those who care about the realization of their goals. Musicians, artists and other artists often resort to crowdfunding – as a rule, their fans and art lovers are not averse to donating a small amount of money so that their idol can realize another creative project. Crowdfunding in business attracts donors in that the startups for the implementation of which the money is raised have original and fresh ideas, which are very difficult to ignore.
Everyone knows the expression “with the world on a thread – a naked shirt.” They can also describe the crowdfunding process. If some people have great ideas and ways to bring them to life, while others have money for this, then why don’t they join forces and create something really worthwhile together?
However, of course, large projects, for the implementation of which an impressive amount of money is needed, require large investors. It is not always justified to collect money in small installments, as it can drag on for a long time, and besides, it is not known whether the necessary amount will ever be collected. But if the project is really interesting, then large investors (or not very large, but nonetheless significant) are usually not long in coming.
What is crowdfunding Participants in the crowdfunding process, namely those people who make cash contributions, then receive a certain percentage, which is determined by the amount of their contributions. In this regard, crowdfunding can be compared with a certain loan, which is issued for doing business. However, for an entrepreneur, crowdfunding has a great advantage over the usual bank loan scheme: if in the case of a loan, interest must be paid regardless of the profitability of the project and its further development, then using crowdfunding, you can develop the business well and then “thank” all of them who took part in this.
Distrust of crowdfunding
Initially, crowdfunding was based on the following principle: thousands and millions of people send 1-5 dollars each (or how much it is not a pity) for the implementation of a large project – creating a movie, publishing an art book or supporting the activities of a public organization.
That is how, in 1997, fans of the Marillion music group raised nearly 60 thousand dollars to ensure that their idols traveled throughout America with concerts. However, over time, the original principles of crowdfunding have erased a little and now it is more associated precisely with investor assistance to young startups. And wherever money appears, people appear who want to cash in on the credulity of others.
And on the Internet there are quite a few scammers who create “fake” projects and allegedly collect money for them. Of course, their activities have significantly undermined confidence in all kinds of fundraising through a worldwide network. However, despite this, the crowdfunding phenomenon is not going to disappear anywhere and is only developing further.
For investors, it doesn’t matter whether large or small, crowdfunding is not only a way to make a profit (that is, your interest) from a startup, but also an opportunity to participate in an interesting project and get moral and emotional satisfaction from it.