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Key Things to Learn About Crowdfunding

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Crowdfunding has become one of the most popular ways to raise money online. Be it for a medical emergency, or for your pet – crowdfunding has become the go to way to raise money. Crowdfunding is not just applicable to medical or social causes, they have found currency in business and economic causes too. Crowdfunding your business has become a great way to raise money after the JOBS Act was passed in the USA.

The boom in crowdfunding is partly the result of increased access to the internet and partly the recession. Fundraisers in India have a lot to do with privatization and liberalization of the economy which happened in the early nineties and continued throughout the next couple of decades. In this article, I will focus on the basics of crowdfunding.

What Is Crowdfunding?

Crowdfunding is the process by which many people contribute small amounts of money to raise a large amount of money for a specific cause.

What Kind Of Cause?

The cause might be medical e.g. someone might be ill and their family may take to crowdfunding to fund their treatment. It might also be social e.g. children rescued for trafficking need to be put in schools and activists might raise money for this cause. In cases of business crowdfunding, someone might need capital to start their business and might need to raise money for this. Causes can differ broadly and there are different kinds of crowdfunding for them.

What Kinds?

To begin with there is the obvious donations based crowdfunding where you pay donations to the cause without expecting anything in return. This is the best model for medical crowdfunding. There is also the rewards based model, where after you have paid the donation you receive a small reward e.g. a pen or a cap.

This works well with social crowdfunding. For business there is the equity crowdfunding model and the debt crowdfunding or crowdlending model. Remember that equity crowdfunding is on hold in India currently, because of concerns regarding the financial literacy of the Indian investor.

What Is Equity Crowdfunding And Debt Crowdfunding?

Equity crowdfunding is a process in which people contribute money to your venture so that it might kick off. In return, you surrender part of the ownership to the investor. It can be done online and people can contribute small amounts. Hence, it is called equity crowdfunding. Debt crowdfunding on the other hand involves many people lending small amounts of money to your venture. You pay interests on the loan. The riskier the venture, the higher is the rate of interest. Crowdlending has specific sites on which you write a fundraiser.

What Are Fundraisers?

A fundraiser is a post written on a crowdfunding site which combines image, text and video to ask people to donate, contribute or lend money to you. A fundraiser must be clearly and well-written and must explain your situation clearly. The link to the fundraiser can be shared during the publicity campaign.

How Do I Publicize My Fundraiser?

There are various ways of publicizing a fundraiser. The most common of these is to publicize through social media. Publicity on social media is mostly free and tends to draw a lot of attention. It can be done through posting, sharing and messaging. If you get tired of conventional posting, publicity can be done through other avenues like arranging get togethers, talking to potential donors etc.

What are some crowdfunding sites in India I can go to?

Impact Guru has a partnership with Global Giving and has worked extensively on medical campaigns, social campaigns and creative and educational campaigns. Apart from this, there are many others like Milaap, Ketto, WishBerry and BitGiving. All of these sites have different focuses.

 

Erica Cormier

The author Erica Cormier