By Rachael Everly, CrowdfundBeat Guest Post,
Crowdfunding is now being viewed as a financial innovation for entrepreneurial projects or other investment prospects. The true success stories can be examined from the Silicon Valley projects as many entrepreneurs made their start-up plans into successful businesses. The initiative created focus for entrepreneurs and the tech ecosystems which ignited the drive for innovation and sustainability. There are a number of factors which lead to Crowdfunding such as lack of mobile/web infrastructure, high cost for the implementation of high end technology, developmental costs and restrictive financial regulations. For most students who become entrepreneurs after graduation, it is more challenging to execute their business plan because of the scarcity of potential investors.
The only choice they have is to go for Crowdfunding as it has now become a fascinating way to raise money for projects, start-up companies and app product development. With limitations to find accredited investors through websites is becoming more difficult due to the constraints of trust and time. Crowdfunding can offer ease and rewards but it’s not that simple and doesn’t come so easy. The best way to go about Crowdfunding is to launch various campaigns through credible resources and links. But Crowdfunding campaigns can also be viewed as get-rich-quick schemes if the word gets out. In such situations, students or parents who are posting for genuine reasons such as for college financing, project development or for any other reason can suffer most.
Here in this article, we would evaluate the potential for Crowdfunding and how it can be successfully implemented for investment platforms.
Starting from the Sources
Some people can view Crowdfunding pretty easy by just signing onto a Crowdfunding website to create a campaign and gather people to financially support it. With the power of social networking, online communities and help from some friends; small sums of capitals can easily be collected. However people can also use it to fund their mortgage loans, medical bills and other expenses.
In recent dynamics for Crowdfunding, campaigns to get the most attention for funding opportunities are film, theatre, music, app technology and video gaming as it caters to die-hard fans for such categories. People support creative and innovative ideas on a particular aspect such as does it offer something of value which can serve as a powerful motivator.
With the new legislation reforms like the federal students loans and crowdfunding, small businesses can also raise equity funding through verified Crowdfunding websites. This means that Crowdfunding platforms would be able to raise money for special startup projects by offering equity in return for them. With key players in the market like kickstarter, rockethub and indiegogo; crowdfunding sector is growing at a fast pace for investing platforms in areas like healthcare, app development and creative innovative products which may attract more visitors to reach the financial targets. However, it is not just about the funds raised, crowdfunding can also cater to other successful factors such as marketing, publicity, networking and contacts as more and more people can get to know about your project and would be anxious for its completion.
Investing platforms can provide larger amounts of capital for start-ups as it extends the use of social mechanics of microfinance and provide expansion for capital. Companies who offer crowdfunding investing platforms post offerings on social networks where anyone could review the offering and express their desire for investment. Such offerings also include general information such as type of equity security being offered, information about the business, progress and timeline towards meeting the financial target and percentage of the company being offered to the investor.
Once the crowdfund proceeds to be invested in the business, distributions are made for any sufficient amount of profit depending upon the potential of the funded business. Investors can then earn a return each year depending upon the company’s operations.
The maximum benefit can be catered to the investor as well as for the project head through crowdfunding. People do invest in crowdfunding as they like to associate themselves with worthy entrepreneurs for developing new innovative products. For example, those people who funded the Pebble Watch did earn lucrative amounts for just the watch. Still it was pretty cool to show off the innovative product to their friends and work colleagues and tell them that they helped to make this project attain success. Who knows? You might even help out to crowdfund the next generation innovative product. Think about it!