Types of Crowdfunding That Works For You

The two most common uses of the word are for start-up businesses aiming to launch a product or service, and for individuals who have endured a disaster. Thanks to crowdfunding platforms, many people who have been affected by a natural disaster, a large medical bill, or another tragic event like a house fire have gotten financial assistance that they would not have had otherwise.

Some crowdfunding platforms, such as Patreon and Substack, have expanded the scope of crowdfunding in recent years to provide a method for creative people—artists, writers, musicians, and podcasters—to continue their creative labor by getting a constant stream of revenue.

Reward Crowdfunding

Reward crowdfunding allows investors to invest in your business in exchange for non-monetary rewards.

This form of funding is frequently employed for artistic endeavors. It's usually a tired system: the more money an investor puts into your fund, the bigger the profit they'll get (eg credits on a record cover, tickets to an event, free gifts etc). The fact that the incentive is usually inexpensive to send is a plus for the company.

Debt Crowdfunding

Debt crowdfunding allows investors to support your project in exchange for a return on their investment in the form of interest.

This financing option may allow you to borrow at a lesser cost than if you applied for a loan through a bank. The benefit of this strategy is that it may be simpler to gain support for a campaign since backers are motivated by the prospect of a return on their investment. This sort of crowdsourcing may be best suited to businesses with a proven track record of profitability.

Equity Crowdfunding

An equity crowdfunder will put money into your business, project, or endeavor in exchange for shares or a tiny interest.

This form of crowdfunding may be most effective for organizations that are looking to expand in areas where they can earn a profit.

Donation Crowdfunding

Donation crowdfunding is a platform that allows charities and others that raise funds for social or charitable causes to build an online community and allow others to give to a project.

While most established charities handle this on their own website, crowdfunding sites can be useful for smaller organizations and individuals looking to raise funds for personal or charitable causes.