CROWDFUNDING AN OLD CONCEPT
“Presented with a new approach”
Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people.
Currently there are two forms of crowdfunding in use today Equity and Reward based funding. Each has it own uniqueness.
Equity Crowdfunding is the collective effort of individuals to support efforts initiated by other people or organizations through the provision of finance in the form of equity. In the United States, legislation that is mentioned in the 2012 JOBS Act will allow for a wider pool of small investors with fewer restrictions following the implementation of the act. Unlike non-equity crowdfunding, equity crowdfunding contains heightened “information asymmetries”. The creator must not only produce the product for which they are raising capital, but also create equity through the construction of a company. Syndicates, which involve many investors following the strategy of a single lead investor, can be effective in reducing information asymmetry and in avoiding the outcome of market failure associated with equity crowdfunding
Reward base CrowdFunding has many characteristics, also called non-equity crowdfunding. The funding for these projects is distributed unevenly, with a few projects accounting for the majority of overall funding. Additionally, funding increases as a project nears its goal, encouraging what is called “herding behavior”. Research also shows that friends and family account for a large, or even majority, portion of early fundraising. This capital may encourage subsequent founders to invest in the project. While funding does not depend on location, observation shows that funding is largely tied to the locations of traditional financing options. In reward-based crowdfunding, funders are often too hopeful about project returns and must revise expectations when returns are not met. The two subsets to reward base crowdfunding are: “‘Keep-it-All’ (KIA) where the entrepreneurial firm sets a fundraising goal and keeps the entire amount raised regardless of whether or not they meet their goal, and ‘All-or-Nothing’ (AON) where the entrepreneurial firm sets a fundraising goal and keeps nothing unless the goal is achieved.
Now you may wonder why I have use this feature of gaining capital for my readers. Being a person of finding new and inventive methods of reaching my goals I felt that those start-up entrepreneurs who desire capital would possibly see the advantage of crowdfunding that would assist them in reaching their goal. My watchword for myself and others who venture into business is “FIND A WAY” the solution lies all around you. Unconventional means of raising capital may accomplish your end result.
Keep Watching, each week I”ll bring you new and unconventional solutions: