3 Types of Crowdfunding and Where Does Your Project Fit In?

Posted on 19 June, 2015 by Team Wishberry

Crowdfunding Platforms
With the recent surge of crowdfunding platforms in India, it can get pretty overwhelming to make the right decision. After all, you can’t just randomly go and launch your project on any platform. Not many realize this, but the right choice of a platform actually makes a lot of difference. Freaking out yet? Don’t. The most basic way to make the right choice is by taking a step back and understanding the different kinds of crowdfunding platforms available and what are they most optimum for.

Rewards based

What is it? The rewards based crowdfunding model is where you offer fun, quirky and very exclusive rewards as incentive for funding your project. Most rewards based crowdfunding platforms offer either All or Nothing (where you either get 100% of the target funding or nothing at all) or Flexible funding (where you can take whatever money you have raised by the end of the campaign, even if it's below the target amount). The main idea here is to not to gain investors or buyers, but generate a sense of community solely on the fact that people like your idea and are willing to get behind it just to be a part of your project. Who is it best for? Rewards based crowdfunding works best when you need to maintain complete autonomy and creative independence of your project. Therefore, projects in the creative sector, like music, film, comics, publishing, games etc. or product based ventures, where idea validation and a sense of community is more important than the money, are ideal. Also because, creative projects can give out rewards that may not have much monetary value without actually trivializing the whole process.

Equity based

What is it? Equity based crowdfunding is where entrepreneurs can reach out to multiple investors and offer them a stake in their business. Contrary to rewards based crowdfunding, in the equity model campaigners will have to give a percentage of their ownership in exchange for equity. To put it simply, anyone who puts money in a project via equity crowdfunding gets a certain percentage of ownership in that business. Who is it best for? The equity based crowdfunding model works best for a classic business setup and small business ventures. Real estate, technology, startups and similar projects benefit best from this model. In equity based crowdfunding, you don’t have to chase venture capitals and high end investors. It’s more towards small time investors and individuals looking to have some skin in a business they identify with or see potential in.

Donation based

What is it? The name in itself is pretty self-explanatory. In this model, people simply hand in money because it’s a cause they feel for, with no returns in the form of rewards or shares whatsoever. Here, you simply donate, out of a sense of charity. Who is it best for? Campaigns where the urgency is high and the reason for funding is pretty serious. Social causes make the perfect cut. No rewards are offered, no skin in the game is given. People are asked to fund simply out of charity than anything else. We hope this pretty much clears it up for you. So, where do you fit in?

We keep cluttering the internet with our writing.

Keep yourself updated