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What is Crowdfunding? We explain modern funding

Almost every day there are reports of new projects that have been funded via crowdfunding. There are now various platforms that facilitate this process for investors and product providers. The special thing about the concept is: anyone can participate, the decisive factor is enthusiasm for the idea.

Crowdfunding is emblematic of finance in the digital era.

What is crowdfunding? These are the basics

In the digital sector in particular, outside capital is often needed to realize new innovations. In crowdfunding, the money is not raised from the bank or another lender, but from ordinary people. This works as follows:
  • On platforms such as Kickstarter or Indiegogo, entrepreneurs present their project and specify the funding requirements.
  • People who are convinced of the idea can invest there. The amounts are usually set in certain steps. This can freely decide the entrepreneur himself.
  • In return for the investment, investors receive certain benefits. This may be an earlier delivery of the finished product, special editions or additional accessories.
  • The participation in crowdfunding is therefore more comparable to a donation than an investment in the classic sense.
  • For entrepreneurs crowdfunding has the advantage that they do not have to give company shares to investors.
  • Importantly, if the specified funding target is not reached, the project is not implemented and all investors get their money back.
There is therefore no risk of investing in a project that will ultimately never exist. The crowdfunding principle is now used for very different purposes, for example, also in gaming, where successful titles such as Pillars of Eternity were implemented in this way. Crowdfunding is also very popular in the app world as well as for innovative gadgets and smart devices and has already written many success stories.

By Crissie

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