Are you an entrepreneur, maker or artist with a passion to lift your business of the ground? Find yourself lacking the capital to make it a reality? With the emergence of platforms like Indiegogo, CrowdCube and VerKami, there is an alternative way to raise funds. It could lead to having a humongous pile of cash in hand.
Crowdfunding is a hot topic among startups and creative people. By getting a large number of people putting in small amounts, you can raise money for your project. The online platforms get you access to potential funders through a trusted network. Spared to meet each one face to face, you will have more time reaching potential investors. Instead of asking a large sum from one or two people through venture capital, you can reach out to the crowd. The concept was first launched teen years ago in US. Since then different models of financing have gained incredible traction.
The most common is a reward model using sites like kickstarter, Indiegogo, Lanzanos and PledgeMusic. Here investors receive a tangible item or service in return for their funds. Barcelona based Verkami say that creators keep 100% ownership. People in return for their contributions get exclusive rewards in form of products, services or experiences. Verkami have since 2010 funded 5400 projects and raised total 27 million euros.
Equity crowdfunding sites like Seedrs is a model where investors get a stake in the company. They become part owners of the company. If the business does well they receive a return on their investment. Based in Spain you will find CrowdCube españa, The Crowd Angel and Sociosinversores.
The lending based “debt” crowdfunding model pays investors back with interest. The investors can also ask for a small revenue percentage of actual sales in return for a loan. Prosper, Funding Circle and Lending Club are sites with a peer to peer system. It means they cut out the middleman to connect people that need money with people that have money to invest.
Donation crowdfunding is where contributions goes to a charitable cause. Online platforms like GoFundMe and YouCaring help people realizing compassionate fundraising. People can get funding and support for humanitarian causes.
Access to capital in Spain has been close to static since the financial crises about teen years ago. Convincing the bank for a business-loan generally can turn out to be slow and non existing. Entrepreneurs find themselves dealing with cold-hearted banks, suffocating loans and greedy interest rates. The banks demand high income and solid equity. The irony being, if you had that in the first place you wouldn’t need a loan.
People are loosing faith in the traditional bank system. They are looking elsewhere for funding and opportunity. That is why crowdfunding is getting more popular each year.
Photo: Adam Berke, Flickr CC