Types of Crowdfunding

Some people have great innovative ideas that they want to see others use in the real world. Even though some of these new ideas may not be worth the money that it will take to develop it, others can be great contributions to the society as a whole. Regardless to its overall contribution, some of these ideas will never be seen if the person cannot get the financing that they need. This said, there are some new funding options available today, and they can assist people with making their dreams come true.


Many of the latest financing options are not traditional because they are not financed by a local bank or an individual’s credit union. Instead, this kind of funding involves securing both small and significantly large sums of money from a wide diversity of resources. Which means, it involves people with a common interest coming together to sponsor those that have great ideas that others wants to see through. The name of this kind of financing is called crowdfunding, and it can be found online on numerous sites like kickstarter.com.


Before an individual decides to participate in crowdfunding, there are some key things that they will need to know. One of the most important involves learning the different types of crowdfunding that’s available today. Listed below are 3 different types that people can consider if they have an interest.


Rewards based crowdfunding


Rewards based crowdfunding can be described as a collective effort that involves a group of people. This group of people are often referred to as the crowd, backers and contributors. This group of people funds certain projects, specifically those that have been launched by the project creator. The project creator is the person that serves in the capacity of campaign manger or project owner. Based on the type of project campaign that the person needs funds for, people may contribute both small and large sums of money to insure a new concept or idea gets off of the ground and makes it to the masses. These projects are normally hosted through an Internet platform like kickstarter.com in order to bring all parties together, the project creator and the crowd.


It is also important to note that the crowd contributes their money in return for perks or rewards for their contribution. While the project creator retains 100% ownership and not responsible for incurring any debt, the crowd receives various kinds of perks and rewards like CDs, DVDs, printed T-shirts, hats and tickets for their contributions. These perks and rewards are provided when the project is successful. For instance, backers may contribute funds in different increments, and they will receive perks based on their level of contribution.


Real estate crowdfunding


Sometimes people want to invest their finances into specific ventures. Especially, those that will give them an opportunity to increase their profits quite substantially, and give them the greatest return on their investment. In some cases, however, they may not have enough money to invest in those that requires large sums of money. Which means, they may be limited in the amount of money that they can earn over time. Today, with crowdfunding opportunities, there are new doors being opened. One in which allows people to invest smaller sums of money into large real estate investment deals. This is why so many people are beginning to consider real estate and crowdfunding as a new path for their investments. These new opportunities are also available to people of all income levels.


Real estate crowdfunding is ideal for virtually anyone since this market can be accessed online at any time. Getting people together with these ventures has also been made easy via social media networks like Facebook, Twitter, LinkedIn, Google+ and the like. One example of real estate crowdfunding involves sharing ownership of a piece of commercial property. Therefore, it is important for people who are interested in this type of investment opportunity to do a through job of research it in advance.


Equity crowdfunding


Equity crowdfunding can be described as a process that allows groups of people (the crowd or backers) to invest in a company that’s not listed on the stock market. Once the backers investment has been made, they will receive shares in the company. For people who are interested in this type of crowdfunding, they should make sure that they are doing their research. Specifically, because there are at least 3 types of equity crowdfunding that people may want to participate in, and they are equity I, equity II, and equity III crowdfunding. All of which can be distinguished by the laws that govern how much capital can be raised, what kinds of advertisements can be promoted across the web, and the types of regulatory requirements needed in managing them properly.


For more information about this type of crowdfunding, people will need to read the JOBS Act, which is the acronym for Jumpstart Our Business Startups. Because the associated laws have changed in recent years, people will need to make sure that they are familiar with what’s going on. One of its greatest benefits today, however, is watching aspiring entrepreneurs benefiting from the power of the crowd.


Crowdfunding is a new innovative way of financing various kinds of ventures. People who have money to invest can place money into non-traditional investments like unlisted real estate property. When an individual is interested in crowdfunding, there are many different things that they will need to know. One of the most important is understanding the 3 different types that’s available for them. Learning the distinctions between each does not have to be difficult today because there is a lot of great information online that people can review prior to making any financial decisions. Even though an individual may not have a lot of money to invest into real estate, a business ideal or the like, they can still participate in crowdfunding. This is because the amount of money that they invest will determine what they will receive. From owning a piece of valuable commercial property to receiving a CD for a small contribution in a project, there are many different ways that people can receive compensation for their investment.


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