Sunday December 04, 2022

Different Crowdfunding Platforms

Crowdfunding is a popular way to raise capital to fund a project or product. Crowdfunding is a great way to raise capital for a project or product. You don’t have to look for investors, but you can simply turn to the crowd.
A crowd is a group of people who support an entrepreneur financially by contributing small or large amounts to help them implement their project.
How does crowdfunding work?
It is essential that the project chooses a crowdfunding platform to raise funds. There are many options on the market.
Some providers specialize in specific industries or scenes. There are also differences in the campaign process and costs.
Once a project has been chosen and accepted by a provider, it will be published on that provider’s website for a period of time.
The provider’s users (i.e. The community has the chance to ask questions, comment, and financially support the project. The campaign ends at the end of the term.
The provider determines how much revenue a project will receive. Other factors include whether the campaign goal was met, etc.
These are the four types of crowdfunding
But not all crowdfunding models are the same. Different financing models can be used for different projects.
There are four types of crowdfunding.
Equity-based crowdfunding
Crowdfunding that is Lending-Based
Crowdfunding that rewards you
Crowdfunding that is donation-based

Here’s a quick overview of each model.
Equity-based crowdfunding
Equity-based crowdfunding involves company shares. This type of financing is especially attractive for start-ups. Backers invest in the company/project and receive the corresponding shares of the company.
The backers hope that the investment will increase the company’s value so that they can make a profit from their shares in the event that the company exits successfully.
Lending-based crowdfunding
This type of financing allows investors to lend money to the campaigner in form of a loan. This loan allows capital to be invested in the project, but must be repaid after a set time and at a fixed interest rate.
The interest rate will rise depending on the risk level. This credit-based financing has the advantage that inventors and companies do not have to deal directly with banks or skeptical financiers. They can be convinced of the idea, but only give the risk capital and appropriate collateral.
Crowdfunding with a reward
This funding model relies on a partnership between backers and campaigners. It is also used by crowdfunding platforms like Kickstarter and Indiegogo. This model is ideal for inventors and companies who want to bring a product to market.
Investors pay a set amount and receive a thank you in return. This can be a small gimmick, such as a postcard, T-shirt, or the product itself, or even a flight to company headquarters, depending on the amount.
Crowdfunding that is donation-based
Donations for projects are the idea behind donation-based crowdfunding. Donors invest without receiving any return. This funding is especially suitable for non-profit organizations.
Difference between crowdfunding and raising money
What is the difference between these forms of financing?
Crowdfunding campaigns have a time limit, a deadline within which the target amount must reach. This is not applicable to fundraising campaigns. While there may be targets that indicate how much money is required, these are not binding. A time frame that is fixed is more transparent for supporters.

Crowdfunding is based on the all-or nothing principle. This means that all supporters must reach the set amount of funding otherwise they will get their money back.
This method is more effective than fundraising in that a “proof-of-concept” is presented simultaneously. It is possible to determine whether the crowdfunding idea is worthwhile. It also ensures that the project is possible to be implemented.
There is also the possibility for a return depending on the type and level of crowdfunding. (See definition above). This gives supporters incentive to participate in the campaign, and creates a connection between project initiators and supporters.
Check out our article on how to start your own crowdfunding platform. Truust can help you with any questions about how to integrate a payment system into your crowdfunding platform.

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