The term crowdfunding refers to a practice where money is taken from a group of people to complete a project. Here, people who invest their money always know where and why they invest their money. This is only for one particular reason. This is an innovative idea for a startup or company, or for something that requires funding. And with the increased publicity of the internet.
It has mainly three important parts. Which are -
The job of the Project Initiator is to propose, that is, let people know about their project.
Supporters can be either individuals or groups whose main job is to understand and support the stated idea correctly.
The platform allows launching that idea in front of the right people so that these three parts together can complete that idea.
Following are the types of crowdfunding -
1. Equity-based crowdfunding
In this type of crowdfunding, investors invest large amounts of money most of the time so that they can get a large piece of equity in the startup. Most of the time equity-based crowdfunding is done for the growth of the company.
2. Reward-based crowdfunding
In this, the investor gets a tangible product or award in exchange for his investment.
3. Donation-based crowdfunding
With this crowdfunding, any person or investor can donate as per his/her own cause for a noble cause. Donations can be of any. Here finally donors do not get any reward.
4. Debt-based crowdfunding
It is invested in the security of the company. This money is given to the company according to the loan and in return, the company will return the money according to the specified interest rate.
Famous Crowdfunding platforms:
Crowdfunding increases the productivity of innovation and entrepreneurship to a great extent. small industries can progress well with the right guidance that makes the way of doing business policy very easy. But always before investing, understand the risks associated with it, only then it is advisable to make any kind of investment.