Crowdfunding: What is it and how does it work?

In the late 90s, if we wanted something to be funded, like a project, a business or a company, we tend to do fundraising and do a lot of proposals for those who might get interested to invest. There are a lot of ways to raise money, this could be asking from friends and family, reaching out to the people who are in line with your business or you may also try to apply for a loan from a bank or an institution.

When we finally reach the Millennial Era, with all the technology we have today, Crowdfunding is the new and easiest way to ask for funding!

Crowdfunding is the same as soliciting money from a massive number of people. A wide range of groups of people convenes small individual investments to come up with the capital they need to help a business or company take off.

Security-based crowdfunding is one of them. It gives an opportunity to those people who would like to invest in private companies (also known as startups). This type of crowdfunding lets the investors receive the agreed and proposed stock, shares or any other security issued by the company for them to get the funds to start their business or company.

There are several types of Crowdfunding. Here are some of them:

Donation-based crowdfunding is usually when someone donates to a cause or charity. A great example of Donation-based crowdfunding is GoFundMe which is very popular on Social Media websites.


Reward-based crowdfunding is when someone donates to unlock a reward linked to the project they sponsor. It is like helping to fund a business that sells products and then when it thrives, you'll receive some of their products in return.

Peer-to-peer lending is a way of getting a loan from another person directly without the need for a bank or a financial institution as their medium. Also the same as debt crowdfunding.


Real estate crowdfunding gives you the chance to invest in real estate projects. This is helpful to those people who would like to put their investments in real estate without having to deal with mortgage brokers, real estate agents, or even contractors. This is also considered as one of the best Securities Crowdfunding.


Human capital crowdfunding is also a way for a person who would like to raise funds for their personal growth or projects. The best example is a Poker Player. They crowdfund money to play and in the event that they have won something, they share their winnings back to their investors.

What is crowdfunding for companies and how does it work?


Crowdfunding can be a great help for businesses that need to raise capital to help them progress further. It is also a way for those startup companies to ask help from a group of investors to start their businesses and get ahead.

Crowdfunding campaigns set a goal and offer something in return for those who are interested to invest. In the event that the goal exceeds the expectation, the investors greatly benefit from it especially if they are the ones who supported the campaign.

Crowdfunding Benefits!


There are a lot more benefits of crowdfunding aside from raising money.

Getting the funds you need for your projects or business is not that easy. Many start up companies usually rely on getting funds from the bank which requires them a lengthy process. Crowdfunding is a great help in a way that we don't need to rely on traditional fundraising and gives more opportunity for individuals to get more investors in a very efficient way.

Crowdfunding has its unique ability to attract new users and increase engagement. And when engagement increases, the opportunity to raise funds also increases as it reaches out not only to those who are in your city or country but all over the world that might be interested in your business or project.

Crowdfunding Risks.

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From an individual or company's perspective, crowdfunding is a great opportunity to raise funds quickly and efficiently. But what about from an investor's point of view? Like any other investment, crowdfunding has its risks.

For instance, an investor could lose their entire investment if the goal has not been met and the business or project idea didn't take off. At some point, it could be a great challenge, especially for startups to meet their proposed goals. When that happens, the investors would likely lose their investment.

Risk is always there and is also associated with crowdfunding campaigns. To prevent uncomfortable situations, investors must carefully go over the crowdfunding's cause and do some background check if their investment would be worth it. Investors should always do their research for their security.

Tips For Crowdfunding!

Everyone wants to be successful in their chosen path. For those who would like to have a successful crowdfunding, we have some tips:

The Goal - you should always know what and where the funds will be used by the entity that is hosting the crowdfunding campaign.

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The People - to make sure that you are investing in the right field, you can do some research about the people who are working for the company or project that you are going to invest in and make sure that these people are more than capable of handling the business or doing the projects to make sure your investment is at good hands.

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The Unique Value Proposition - make sure to look out for the technologically inclined company that can make a big difference. This is a real game-changer! Before investing in crowdfunding, try to determine their UVP first to see what they are capable of and the opportunities that might come in their way that can potentially help them progress.

The Market Traction - researching about the trends in the market is also necessary to make sure that the product or service that you are investing in would sell. If there's no demand for the product or service that the business or project proposes, that might not be a good place to start investing.

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The Fraud - for your security, always do background checks on the company, businesses or individuals that are doing the crowdfunding. There are a lot of counterfeits and frauds on the market nowadays and no one would like to get scammed, right? Be mindful especially when you're on the internet, always think before you click!

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