Crowdfunding has garnered considerable attention over the last couple of years. Growing internet connectivity and the rise of social media platforms have played a major role in the establishment of this new and innovative funding option known as “Crowdfunding.”
Remember the controversial #Babakadhaba story that made the front pages of every news channel and social media platforms a few months ago? The story began with a small video on social media that went viral instantly. Kanti Prasad, who ran a small food stall named “Baba Ka Dhaba” in Delhi, was in grief after his sales crashed during the lockdown.
He pleaded for help, and an online crowdfunding effort launched by a social media influencer became a boon for him in this grieving situation. Prasad, who was struggling to earn Rs. 60 per day then, was shocked to see lakhs of rupees being collected in his name through online contributions.
That’s how effective crowdfunding can be.
Do you have an innovative business idea that could use some financial support? Are you looking for a way to raise money for your project or startup? If so, then you may want to consider crowdfunding. Before learning about how CoffeeMug.ai can help you with getting crowdfunding for business, let us find answers to some important questions.
What is crowdfunding?
Crowdfunding is the process of raising a little sum of money from a large number of individuals to establish a new business venture. The process connects investors and entrepreneurs through a vast network of social media platforms and crowdfunding platforms to acquire funds.
How does crowdfunding in India work?
The best part about crowdfunding is that businesses accept the funds as a deposit on a product. This implies that the fundraisers receive their products as soon as the company completes the manufacturing process. If the company fails to meet its target, the platform will use a secure automatic procedure to return all funds to the respective fundraisers.
This secure mechanism is available on all crowdfunding websites, including Indiegogo, Fundable, and Kickstarter. This is the reason behind the growing popularity of crowdfunding for businesses in recent years.
Since most individuals will easily consider donating for advanced booking of the startup’s items or services, crowdfunding is a more lucrative approach to raise funds.
CoffeeMug.ai offers a simple and effective way for businesses to raise money through crowdfunding. Our platform makes it easy for businesses to create and share campaigns, connect with potential investors, and track funding progress. With Coffeemug.ai, businesses can quickly and easily get their crowdfunding campaigns off the ground and start raising the money they need to grow.
Types of crowdfunding for startups
Crowdfunding for startups comes in a variety of forms. From donation-based crowdsourcing to equity-based crowdfunding, investors can profit more from their investments. The popularity of crowdfunding can be attributed to the fact that it is simple, secure, and open to everybody.
- Reward based crowdfunding
In this method, funders donate to your project for non-monetary benefits. Reward based crowdfunding is common in artistic initiatives, where funders or contributors are given a symbol of appreciation or free products in exchange for their contributions. This is how sites like Kickstarter, Indiegogo, and others operate.
- Donation based crowdfunding
One of the best examples of donation based crowdfunding is GoFundMe. This type of crowdfunding is typically for charities with a social mission. Users just start a cause and then share the campaign’s link with their friends. They specify a goal, and all funds raised are transferred to the account of the campaign’s creator.
- Equity based crowdfunding
The prime objective of equity based crowdfunding is to make a profit on the money invested. The process is common in the stock market, where people acquire shares of several stocks and then sell them when the price rises.
Equity based crowdfunding is also a fantastic tool for startups to raise funds for their projects. However, they will be required to sign a contract stating that if the project fails, they will either provide equity to the shareholders or refund their money.
- Debt crowdfunding
In debt crowdfunding, funders or sponsors offer funds in exchange for interest or a higher profit. Banks and lending companies are the most common users of debt crowdfunding.
Advantages of crowdfunding
- Risk Free
One of the advantages of crowdfunding for entrepreneurs is that it is risk-free. All you have to do now is come up with a captivating campaign and get it in front of the public. They will fund it if they like it. Additionally, your product is automatically exposed to a large number of potential clients.
- Unlimited funding
Another advantage of crowdfunding is that you may set a financial target without having to pay any equity. Because your product is being funded by the general public, you may either give them discount coupons or give them products once the project is completed.
- Sell products in advance
Another big advantage of crowdfunding is the ability to offer products in advance of receiving funds. For instance, your company claims to provide backpacks that have power banks. Each backpack now costs about Rs. 800. You can set a Rs. 800 crowdfunding goal for each user and give them the backpack as a gift. Once you have received the funding amount, you can begin shipping the backpacks to the users. This is how most Kickstarter crowdfunding projects work.
How CoffeeMug.ai can help you?
CoffeeMug.ai is a professional networking platform powered by AI that focuses on connecting entrepreneurs with top-of-the-funnel business executives, mentors, and investors. The platform enables all types of scalable businesses to raise funds via angel investors, crowdfunding, and venture capitalists. If you believe that your startup holds the potential to succeed in the market and you have all the skills needed to put it into action, but are unable to do so due to a lack of funding, then subscribe to CoffeeMug.ai today.
FAQs
Q. How do businesses create crowdfunding?
A. The core of your crowdfunding project is how you make money. The following are the most popular crowdfunding platform types:
P2P (peer to peer) lending crowdfunding
Equity-based crowdfunding
Hybrid-based crowdfunding
Reward-based crowdfunding
Donation-based crowdfunding
Q. Is crowdfunding free money?
A. No, crowdfunding is no free money. There are no websites that allow you to raise money for free. Despite the costs, crowdfunding remains a very cost-effective fundraising tool.
Q. Do you have to pay crowdfunding back?
A. If you use donation-based crowdfunding to raise money, you do not have to pay it back while other forms of crowdfunding involve repayment.
Q. Can you fundraise to start a business?
A. Yes, fundraising for small companies may also be a terrific way to get support from the community. You can sign up and start a fundraiser for your small company now and use all of the aforementioned suggestions to share it with your social network.
