In a field where everyone is trying to get money for their latest idea, it can be difficult — if not impossible — to secure outside funding for your project. In the past, your options for getting large sums of cash were primarily venture capital funds or angel investors. Today, though, crowdfunding has become a practical alternative for entrepreneurs who need funds but don’t want to sacrifice equity or go through the grueling process of being grilled by investors.
What Is Crowdfunding (in a Nutshell)
For those unfamiliar with crowdfunding campaigns, crowdfunding is a new way for entrepreneurs to raise capital by tapping the masses rather than a small pool of investors. You might have heard of a few, like Kickstarter orPozible.
Crowdfunding works by allowing virtually anyone to make relatively small contributions to a project in exchange for tangible goods, rather than having a small pool of investors risk large chunks of funds. Donation amounts vary from campaign to campaign but they typically range from $1 up to $10,000.
Who is Crowdfunding Best Suited For?
Crowdfunding sites originally gained notoriety in the creative and artist communities because they allowed artists to successfully raise funds even though most traditional investors wouldn’t touch their work. Crowdfunding proved to be highly successful for these groups because the rewards are practical: by offering CDs, copies of paintings and other tangible goods, the system became a way to pre-order a variety of innovative products. As crowdfunding became more popular, digital downloads emerged as a popular reward option.
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