Crowdfunding is a well-known startup financing mode where money is procured from large number of people usually through the internet. Besides internet mobilization of capital through other ways such as mail-order subscriptions, benefit events, and other methods are also forms of crowd funding.
Under crowdfunding, the promoter presents his business to large number of interested financiers. The investors are offered with opportunity to make investment in the proposed venture. Later, they agree to support the project and got it implemented.
Crowdfunding is essentially the opposite of the mainstream approach to business. It is some kind of alternative financé. Here, it’s much easier for the promoter to provide the opportunity in front of more interested parties and give them more ways to invest in the business in return for equity or debt. Advantages of crowdfunding are:
- Reach: They have good reach with thousands of investors coming to know about the new venture.
- Presentation of the venture: through the crowdfunding campaign, the investor goes through the process of looking at his business from the top level—its history, potentials, challenges, addressable market, return prospects etc.
- Efficiency: crowdfunding is an efficient way of mobilizing resources on low cost.
Crowdfunding is getting more attentions as well as relevance in the new digital era. Several projects and investments are financed by thousands of investors through the internet; each contributing small amount of money.