What is crowdfunding?

Did you know that about 60% of people worldwide are connected to the internet? This has led to the rise of a new financial option called crowdfunding, which is gaining popularity.

Crowdfunding online is cheaper, more convenient, and has a wider reach than traditional fundraising methods. It involves using a website to help campaigners raise funds from donors who contribute small amounts to support a cause they believe in.

Here’s an example of crowdfunding: If someone in your community is suffering from a rare disease like SMA and needs expensive medical treatment, they may set up a crowdfunding campaign on a platform to ask for donations. They’ll explain why they need immediate help to save a life, and you can donate any amount you can afford.

By contributing, you can make a difference in someone’s life, and both the campaigner and donors benefit from crowdfunding. Now that we understand what fundraising and crowdfunding are, we can explore the various types of crowdfunding available.

Types Of Crowdfunding

• Donation-Based Crowdfunding
  • In donation-based crowdfunding, you can expand your fundraiser’s reach by sharing it with close friends, family, and new people on social media. This helps create more awareness and potentially leads to more donations. Some examples of this include:
  • Medical Crowdfunding: The crowdfunding platform allows you to raise funds for any medical treatment, surgery, post-op care, hospital bills, and other healthcare-related expenditures. Medical fundraising covers all critical illnesses, be it
    • rare diseases like Spinal Muscular Atrophy (SMA), whose treatment costs crores
    • to conditions that require long-term care, like cancer. liver disease, and organ failure
    • to common afflictions such as heart diseases, and, last but not least, rushed medical emergencies like accidents and acid attacks.
  • Crowdfunding For NGO
    • Non-governmental organizations (NGOs) can receive public support through crowdfunding to achieve their mission of creating positive social change. The funds raised through this method can help strengthen their values and advance their goal of making the local community a better place to live.
  • Personal Fundraising
    • You can raise funds for any cause that is important to you through personal fundraising. This includes pet and animal fundraisers, memorial and accident fundraisers, crowdfunding for education, and medical fundraisers. There are many other personal causes you can choose from as well, and the possibilities for fundraising are endless.
  • Creative Fundraising
    • Crowdfunding for creative causes allows individuals and NGOs to gather funds for events, feature films, wall painting initiatives, and innovative startup ideas.Types of creative causes you can raise funds for are:
      • A community event
      • Publishing books
      • Filmmaking
      • College project
      • Cultural event
      • Handicraft exhibition
      • Cooking classes
      • Poetry and stand-up event
• Reward-Based Crowdfunding
  • Reward-Based Crowdfunding is a way for small businesses to raise funds online from individuals in exchange for a product or service. To participate, entrepreneurs present their business idea or project on a crowdfunding platform, along with a fundraising goal. In return for their donations, donors receive rewards such as trendy clothes or handmade jewelry.
  • Startups that are not eligible for small business loans but have exciting projects that can impact society are best suited for this type of crowdfunding. Anyone can contribute to a reward-based crowdfunding campaign and share it on social media to spread the word. Crowdfunding platforms typically charge a fee of 5% to 13% of the raised amount, with additional charges depending on the platform chosen.
• Equity-Based Crowdfunding
  • Equity-based crowdfunding is unique compared to other crowdfunding methods because instead of offering rewards, you sell a portion of your business shares to contributors. There are two main types of equity-based crowdfunding:
  • Accredited Crowdfunding– In this type, a company raises funds only from accredited investors having a high net worth.
  • Open-access regulated crowdfunding– Here, anyone interested can invest in exchange for equity shares of that particular company.
• Debt-Based Crowdfunding
  • Crowdfunding through loans, also known as debt crowdfunding, involves borrowing money from investors who expect to receive interest on the principal over time. This type of fundraising occurs on a crowdfunding platform and is a cost-effective alternative to bank loans because it eliminates intermediaries. This results in lower costs for borrowers and higher recovery rates for lenders.

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