Use Crowd Funding To Start Your Venture

By Author: Crowdsourcing
Total Articles: 4
Comment this article

Crowd funding is a new method for raising capital for a project or venture and one of the most popular forms of crowdsourcing. With Crowd Funding people request money through Crowd Funding websites from a large group of people including contacts within their networks as well as from strangers. Through Crowd Funding, entrepreneurs’ can raise money for start-up ventures or to grow their businesses or individuals or groups can raise money to fund special projects and initiatives.

It has been successfully implemented in different fields including disaster relief programs, art campaigns, citizen journalism, political campaigns, creating software and funding small businesses and startups. Crowd Funding has allowed a number of people to launch their ideas or build new organizations. Once initial investors have started to fund the project, Crowd Funding sites show ho much has been raised towards the overall target. Typically the initial funding comes from people within the requestors own network and once twenty to thirty percent of the goal has been reached, ...
... other participants will start viewing the project as viable and will start making contributions.

Crowd Funding Models

Funding can be solicited with or without a reward in return. There are three basic forms of Crowd Funding. The first is where people donate money to a venture or cause they wish to support in exchange for a token of recognition (i.e. a discount on the first products off the production line or a T-Shirt promoting a special cause). The second form of Crowd Funding where people lend money in exchange for the return of their capital with an interest payment (i.e. micro-lending to help a farmer in a third world country buy a new tractor). The third form of Crowd Funding is where investors take a risk in the future performance of a business in exchange for equity, revenue share or for a share in future profit

Advantages and Disadvantages of Crowd Funding

As good as it sounds, there are some potential issues to be aware of when you use Crowd Funding. One is that you should only use Crowd Fund sites that have invested in the controls to monitor projects and vet requestors. There is no legal obligation on the requestor to follow through with their pledge to either reward the contributor or invest the capital as stated. If you participate in a Crowd Fund initiative that is offering equity in return for your investment you need to be sure that the transaction is structured appropriately in accordance with the laws or regulations in the country that the Crowd Fund platform is registered. There are various laws and regulations that need to be followed when soliciting funds from the general public in exchange for an equity participation in the business or a share in the future performance of the company. In many places this is not allowed unless the investment vehicle has been reviewed by the appropriate regulatory body and has been cleared as either an instrument that does not need to be regulated or one that meets the regulatory requirements. In the US this is the Securities and Exchange Commission, in Canada it is the Ontario Securities Commission and in UK it is the Financial Services Authority. Another disadvantage is that the project and its details may have to be disclosed in order to obtain Crowd Funding, which increases the risk of the idea being imitated by somebody else. However, many innovative projects that may not get funding from other sources have found success with Crowd Fund models.

To know more about the Crowdsourcing Sites kindly Visit at http://www.crowdsourcing.org