CF101 — Part 1 — Crowdfunding: reward or equity?
What exactly is crowdfunding? Let’s bring it back to the basics.
Think of it as a beehive. Each piece of the honeycomb is built upon the former backer, culminating in an impressive formation, all contributing to one cause.
There are fundamentally two types of crowdfunding: reward-based and equity-based
Reward Crowdfunding — raise funds from the general public in exchange for insider products or services. Backers are contributing to a cause they care about and often buying into a sense of prestige, becoming part of an inner circle who are granted access to the latest in developments and releases from the startup.
Benefits: create a very engaging relationship with current and prospective customers and receive feedback about products.
Equity Crowdfunding — raise large funding amounts from business angels or institutional investors in exchange for shares of the startup. These individuals should have added value components to bring to the table, including industry experience and expertise as well as extensive networks which can all be used to open doors to increase company’s growth.
Benefits: raise funds to ramp up business growth and onboard new shareholders who can contribute to the success of the business.
So how does a team determine which of these methods to crowdfund their project? Covered in Part 2 of CF 101.
You can learn more about about crowdfunding platform by visiting www.crowdfooding.co.uk