Crowdfunding: Definition, Types, and Benefits

Have you heard the term through crowdfunding? Outline, through crowdfunding is a method of obtaining capital or funding collectively.

Now, through crowdfunding become an online investment trend that is mushrooming in the world because of the various benefits it has. In fact, this method is predicted to be the most suitable method to be applied in today's uncertain global economic growth.

So, what is it actually called through crowdfunding and why is this considered beneficial? Check out the full explanation in this article!

Definition of Crowdfunding

Literally, through crowdfunding derived from the word crowd, which means a crowd or a large number of people and funding which means fundraising. Therefore, through crowdfunding often known as a funding scheme that comes from a number of people to fund a project.

Quoting from the website of the Ministry of Finance, through crowdfunding is a funding technique for a project or business unit that involves the community at large. In the process, through crowdfunding managed by an internet-based platform for easy access.

Crowdfunding was first sparked in the United States in 2003 with the launch of a site called Artistshare which aims to make it easier for musicians to find funds to produce a work. In 2014 to 2016, through crowdfunding became increasingly popular with the platform increasing to 2000 units and being able to achieve funding of around 60 billion US dollars.

Types of Crowdfunding

1. Equity Crowdfunding

Equity crowdfunding (ECF) is a type of funding that offers shares to investors. Crowdfunding This type is suitable for raising large amounts of money.

In the system, the business owner will offer company shares with a target amount of funds within a certain period of time to investors on a platform that you use. With the provisions on the platform, all funds will be recorded as having reached the target or not.

Later, business profits will be given back to investors according to the portion of funds that have been provided.

2. Donation crowdfunding

Crowdfunding donations is type through crowdfunding which raises funds using a donation system. Generally, through crowdfunding this type is used for social purposes, such as fundraising for disasters, social institutions, poor communities and so on.

If through crowdfunding This type is used for business purposes, so make sure beforehand that your business is related to the interests of many people, so they want to donate to help your business.

3. Crowdfunding Rewards

reward crowdfunding is a type of funding that uses gifts to attract investors. at a glance, through crowdfunding this type is almost the same as equity crowdfunding.

The difference between the two is in the form of benefits offered, namely in the form of reward offers, such as price discounts, exclusive memberships, free trial services, and so on. With these advantages, investors will feel part of the initial development of the business.

4. Debt Crowdfunding

Debt crowdfunding is type through crowdfunding which is almost the same as money lending services. The system is to borrow money which can later be returned in the form of incentives.

at a glance, debt Crowdfunding is almost similar to P2P (peer-to-peer) lending. the difference, through crowdfunding it has funds raised by donations by involving business owners, funders and platform providers.

Crowdfunding advantages

Crowdfunding is one of the most widely used fundraising methods by startup companies, because it has the following advantages.

1. Business Becomes Known Faster

To get funding, you need to explain your business development plan to the public first. This will certainly help your business to be increasingly recognized by the public,

You can take advantage of various platforms, such as websites, social media, and other alternative media to inform campaigns through crowdfunding-your.

2. Attract Potential Investors

Crowdfunding it is also useful for matching business owners with suitable potential investors. Therefore, you can do through crowdfunding by highlighting your business ideas that are unique, interesting and have promising potential.

3. Easy Submission Process

Crowdfunding usually has an easy submission process because it can be done online. That way, you don't have to bother visiting each of your potential investors one by one.

4. Can Determine Crowfunding System

You can also specify the system through crowdfunding for your own business. In this case, you need to adjust the type through crowdfunding that you use for your business purposes.

5. Reducing Competition

With through crowdfunding, you can also avoid competition with other companies that are already considered well-known. The reason is, through crowdfunding allows you to raise funds with only ideas and business potential.

6. Building a Consumer Base

Crowdfunding It also helps you build a consumer base. Because, through the campaign through crowdfunding, information about your business will be open to anyone, including potential consumers.

Well, that's a complete explanation about through crowdfunding. From the explanation above, it can be concluded that through crowdfunding is one of the popular methods used to make funding.