Guest post by Jon Emge
Years ago, back in the day, if you had an idea for an invention or gadget, or if you wanted to start your own business, you only had a few options when it came to funding your start-up company, or build your idea.
You could use personal finances and savings to fund the company or idea, or go to the bank and hope to get a loan.
Using your own money is risky, if the business or idea fails, you may lose your life savings.
Borrowing the money can be a good idea, but most lenders will probably require you as the business owner, to guaranty the loan. If the business doesn’t generate any money, you’re still on the hook for the loan.
Today there is another alternative or option in attempting to get the cash needed to either start-up a business, or fund a project, and that is crowdfunding.
Crowdfunding is basically raising money for a “project or venture†with contributions from various individuals, and is usually done through the Internet.
$5.1 billion was raised through crowdfunding in 2013.
Forms of Crowdfunding
There are various ways an individual or company may structure the way they ask for people to invest in their project. Yes, they are all asking for money or funding, but depending on the project, the structure may be different.
Reward Based: This is a popular crowdfunding method for musicians and other artists. The artist sets a goal for a certain amount of money and a date to reach that goal. The artist outlines what the money is to be used for, in this example we will say to record a new CD of music. The artist then tiers donation points, £25, £100, £500, £1,000 and so forth. At each of these tiered points the artist then has rewards attached to that donation. A £25 donation will give you a copy of the new CD when completed, and it will be autographed by the artist. A £50 donation may get you the CD and a band t-shirt. A £100 may get you the autographed CD, a band t-shirt, and also your name mentioned on the CD’s notes. You can see, the more a person donates, the better the reward.
