FinTech Jargon Education — Crowdfunding

There is no denying crowdfunding will play a prominent role in the FinTech sector over the coming years. Companies and entrepreneurs are always looking for additional funds, and rather than relying on traditional investors, crowdfunding campaigns seem to be the new — and successful — trend.

Also read: FinTech Jargon Education — Internet of Things

How Crowdfunding Can Change Your Business

Entrepreneurs and established companies will be in favor of the crowdfunding concept as it removes the need to rely on one particular investor. But there are two types of crowdfunding campaigns people have to take into account. One type focuses on rewards in exchange for a financial pledge, whereas the other kind is equity-based.

Most people will have heard about platforms such as Kickstarter and Indiegogo by now, which are both reward-based services. All of the projects listed on these platforms will try to attract as many individual investors as possible, which can come in the form of individuals and businesses alike.

On the other hand, various crowdfunding platforms are focusing on startups and companies looking to raise funds by offering a part of their equity in return. Crowdcube is one of those platforms, and any investor in a particular project will be eligible to receive a dividend, assuming the project listing specifies this benefit.

Both of these phenomena have been getting a lot of attention lately. Venture capitalists are a great way for companies to secure additional funding, but with that financial aid comes certain expectations and responsibilities as well. Major investors have a say in the future direction of any company or startup, and crowdfunding helps to eliminate this potential hurdle.

For the companies creating a product or service, crowdfunding campaigns give them a way to gauge potential consumer interest as well. If a campaign is not successful, the team can go back to the drawing board and come up with an entirely new idea in the future. No money gained, but not too much time and money lost either.

Despite all of the potential this solution holds, it is not suitable for every company or startup in the world. The FinTech sector will play a significant role in this regard as companies in this industry can come up with easier-to-use and more transparent crowdfunding platforms in the future. Exciting things are ahead for the FinTech sector.

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Originally published at Fintechist.

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