How reward based crowdfunding works?

There are various methods and modes in which crowd funding is generated and they are equity based investment, donation based, debt based, and reward based. In the equity based the investor will get dividend on his investment when the project starts making profit and one can sell the shares also if their price rises in the stock market. In donation based there is no question of return and it is a volunteering act of charity. Only thing is that the company may mention the name of the donor for increasing the reputation of donor in the business world. In the debt category the investor will expect timely interest on his capital. The last is reward based and here the company or the enterprise may reward the investor with some goodies or promotional products or things like that but the company is not bound to do so but will try time to time show that gesture to the investor. We must note that crowd funding is a risky proposition for the investor and only the successful enterprises who would be able to prove their innovative products in the market will only be able to give return in any form under the above different modes.

Rewards-based crowdfunding is a type of business financing. The entrepreneurs will take donations from various individuals and will pay a reward in the form of a service or a product in return. For example, if you are funding a singer to make an album of his songs he may give you a copy in digital form of his album. The reward or service size will depend on the size of the finance one will extend.
The person who wanted the financial support will publish the details about his product on a crowdfunding platform and solicit donations. Anyone can donate. As these donations are from individuals the donation may be small amounts only. So the promoter has to get from many individuals.

The positives and negatives of this system are as mentioned below.
Positives:
1. The easiest and cheapest way
2. No collateral security is required.
3, The system is very simple
4. No equity sharing.
Negatives:
1, It is not good for higher capital projects.
2. your idea will be known to many people
3. Patenting the idea will become a must.

The investor wants a product made by the organisation or service from the organisation only. But not money back.

The following are some of the good platforms where we can place our proposal for reward-based crowdfunding.
1. GoFundMe
2. Indiegogo
3. Kickstarter

You have to make a good write up on the business proposal with all required details and can place it on the website. You can make a good video with all the details that will appeal more to the individuals.

In reward-based crowdfunding, the return is linked to reward-linked and depends on the project you are funding. This is similar to donation-based crowdfunding, as you do not get returns on invested capital or equity in it. In this, the investor gets a tangible product in exchange for his investment. Crowdfunding is a type of business investment. A group of investors invests surplus capital in business ventures that need funds regularly. Under this, a small number of contributions are taken online from a large number of people. It is a low-cost and effective way to raise funds for a business. Today, crowdfunding is also being digitized. People are now doing crowdfunding through the internet and it is being used in every workplace today. Today, people are raising money from around the world for their work through crowdfunding. All the NGOs and organizations of the country, which have been created to help the common people, are getting donations from many plate forms made online.

Reward-based will enable you to accept funds from the individuals and for the same, some type of rewards are allocated to the investors.These platforms like Kickstarter,
GoFundMe etc would raise money for their projects. There could be several platforms offering their help for the persons suffering from any chronic disease and these platforms would help the sufferers liberally with the funds they require.
Business owners have to substantiate their ideas and their goals on this platforms. They would assure the investors for generous donations or some lucrative rewards for their investments. However, rewards in comparison to investment may not be attractive.
This platform can be availed by anyone such as family, friends, customers etc with their investments and you may expect some rewards in such campaigns.
These platforms can charge you any amount ranging from 5 percent to 13 percent depending upon their policies and other related expenses.
The following are the advantages you might get by way of your investments-
1) It could be one of the cheapest ways.
2) It is a simple process and does not involve some legal help.
3) You could retain all equities of the company with your huge investments.
Disadvantages-
1) Your ideas could be stolen and it would be better if you could patent your ideas so that the same is not stolen.