There are many ways of collecting funds for your ideas, products and campaigns. Crowdfunding is a model of alternative financing, but it is much more than that. Crowdfunding will enable you to bridge the financial gap in the initial development stages of an idea or project, test your idea within the community or build one of your own.
The term crowdfunding came about through the combination of the terms "crowd" and "funding". In a short period of time, a good idea can help turn a person into a billionaire, a socially responsible role model or a successful innovator. However, acquiring the funds for its realisation is not always that simple, particularly during the initial development stages. Crowdfunding, represents an alternative way of collecting funds which enables their acquisition with help of the community.
Therefore, crowdfunding represents a way of bridging the financial gap in the early development stages of an idea or project, testing your idea with the community, or establishing and building the first line of support or users, as well as raising the visibility of your idea, product or service. Promoting an idea in any field, by means of a well-conceived online campaign, gives the most persistent and well-prepared persons the possibility of acquiring the desired initial capital. It is provided by backers, namely persons from any part of the world interested in your idea for various reasons who thus want to support your campaign and invest money in it. Such way of collecting funds is simpler because, unlike bank loans, it does not require guarantees and endorsers. For example, banks have refused to finance the first commercially successful smartwatch Pebble, which was manufactured after a sum of 10 million dollars had been collected through the Kickstarter crowdfunding platform for its development. Just two years later, more than one million units were sold in the market.
Depending on what you offer and what the backers/investors get, there are four basic types of crowdfunding:
DONATION-BASED CROWDFUNDING is primarily intended for humanitarian and non-profit campaigns. In this case, backers donate funds for an idea or a cause they consider important, without expecting to get something in return. In a broader context, this model of group financing is important for the entire community. It is most commonly used for the development of socially beneficial projects and encourages a culture of giving. Serbia's donacije.rs platform is intended for those very campaigns and projects.
REWARD-BASED CROWDFUNDING is a type of alternative financing best-known in Serbia, mainly due to the fact that Kickstarter and Indiegogo, the two most widespread platforms, operate in this manner. In this case, a reward – perk – is offered in exchange for financial support. Perks are distributed in several value categories, from symbolic ones such as badges or t-shirts, to valuable rewards such as smart devices.
CROWDINVESTING OR EQUITY CROWDFUNDING provides the backers with a possibility of receiving securities instead of rewards. Hence, it is most suitable for investing in budding enterprises. Crowdinvesting is only staring to develop in Serbia. Still, two successful Serbian start-up campaigns were launched via foreign platforms in 2018 – PlayerHunter and StrawberryEnergy. A total of 1.2 million dollars has been collected in those campaigns.
CROWDLENDING is a form of online lending with interest rates lower as compared to banks, and profits mostly higher than in the case of regular saving. Globally speaking, this market is larger than all of the other types of crowdfunding combined.
There are several reasons for one to initiate a crowdfunding campaign, the collection of funds usually being just one of them. Take a look at some other reasons for launching a crowdfunding campaign.
By means of crowdfunding, a broader group can hear about your product, service or campaign, via social networks and the media. Such promotion is important both for the existing community, target groups and consumers, as well as for the creation of new ones.
Crowdfunding provides you with an ideal opportunity to test your ideas and products in the broader public, or to recruit your first users. It also helps you test the existing market and open new ones.
Crowdfunding helps you determine the right place for each member of your team – or find new people who wish to become part of your story. Through a crowdfunding campaign, the team grows stronger and becomes better organised and harmonised.
Launching a crowdfunding campaign is available to anyone with an internet connection and a good idea. At the same time, everyone with an internet connection, willingness to support a campaign and a bank card can contribute to a crowdfunding campaign.
Financial resources are the most common reason behind launching a crowdfunding campaign. Although crowdfunding is no simple matter, it does make funding easier for many people in times when it is difficult or impossible to reach other funding sources.
A successful crowdfunding campaign will help you gather people who believe in your product, service or idea – old and new people and communities.