Crowdfunding for Start-ups
There was once a notion that all startups needed to be backed by major investors, companies or banks in order to make it big in the market. However, that notion changed after startups found a new way to fund their business; crowdfunding. In this blog, we explore the various aspects of crowdfunding and why it may be a better alternative to angel investment, bank loans or other conventional forms of funding.
What is Crowdfunding?
Crowdfunding is defined as the practice of getting a project or venture funded by several individuals through their contributions. This is usually done via the internet on various crowdfunding platforms.
What’s in it for the investors?
There are different types of crowdfunding depending on the nature of the campaign. Investors are entitled to rewards (rewards-based funding), a stake in the company (equity-based funding), interest (debt-based funding) or other benefits for their contribution. Some may even donate without expecting anything in return. This is usually done for charitable causes.
Which platforms can be used for crowdfunding?
There are several platforms globally that can be used for crowdfunding such as IndieGoGo, Kickstarter and GoFundMe. In the UAE, there are platforms such as BeeHive, Eurecca and Zoomaal that one can use depending on the type of project s/he wants to get funding for.
What are the downsides to crowdfunding?
Once your project is up for crowdfunding, it is vital to reach the goal (target investment) in a specific amount of time. Generating traction for the campaign is often a challenge when it comes to crowdfunding. The legal framework within which you can get funded may be a challenge for many. Before you go live with your campaign, make sure you understand the legalities. Each country may have a different legal framework when it comes to crowdfunding.
3Doodler, the 3D printing pen raised over $2million in just 34 days. The Oculus VR headset raised over $2.4million in 30 days and Ouya an open-source gaming platform raised over $8.5million in 29 days. There are several success stories like these that have benefitted from catching the imagination of the masses.
Is your project the next crowdfunding success story?