CROWDFUNDING: What is it? How does it work?

By julian2344 | STARTUPS | 23 Aug 2022




If you have an idea, a project or a dream and you don't know how to finance it, here is a solution: Crowdfunding.
Many people will surely know them for quite some time and there are also many new people who are joining the era of technology and finance that still do not know what is this system of financing projects, here is a brief explanation.


Crowdfunding is also known as crowdfunding, it is based on the idea that there are people with money who want to support others with ideas. For those who want to carry out a project and need a considerable amount of money, for example $10,000, it is difficult to get a single investor to provide the entire capital, but with the use of the Internet and social networks it is easier to attract 100 investors who contribute $100 each.

Crowdfunding can be used for many purposes, from artists looking for public support, political campaigns, debt financing, film production, book printing, development of prototypes or ideas, small businesses, the truth is that the possibilities are endless.

Nowadays there are more and more crowdfunding websites and thousands of projects financed by this method.

How does Crowdfunding work?

The entrepreneur, artist or creative sends the project to the website indicating a detailed description, amount of funding, time of collection and rewards offered.

The project is published for a certain period of time, 30, 60, 90, 120 days, it is promoted as much as possible using social networks or different marketing resources such as explanatory videos, technical data sheets, prototype videos or other options that the developer of the idea wants to present. At the end of the deadline it is known if the required funding was reached or not.
If the required financing is not reached, the money is not given to the entrepreneur and the money is returned to the investors (there are cases in which if the required financing is not reached, a second round of promotion and fundraising can be carried out or even a second round of fundraising can be carried out with the amount raised).
If the requested funding is reached, the money is given to the entrepreneur and the investors receive the rewards once the project is completed.

Modern Crowdfunding was born with the action of the fans of a British music band called Marillions to finance a tour of the United States in 1997, at the birth of the Internet. The first platforms were dedicated to the music industry, nowadays this concept is applied in many fields.
Crowdfunding platforms allow the connection between entrepreneurs and investors, here are some of them:

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