What is Crowdfunding and Why is it So Popular?

crowdfunding

Over the many years of capitalism that the world has endured, people and businesses have found many different ways to acquire funding or business loans, most of them being through traditional lenders like banks and private investors. Whilst this has proven effective in the past, the 21st Century has hailed a new era of funding sources, with crowdfunding having swiftly risen in popularity over the last decade or so. As such, here is some useful information about crowdfunding and its popularity.

What is Crowdfunding?

As the name would suggest, crowdfunding involves pitching a business idea/model to a ‘crowd’ of people. Far from making impassioned speeches in the streets, however, this is done purely through online platforms like Kickstarter and Indiegogo.

The people (or investors) in question could be anyone, as there are no prerequisites for those using a crowdfunding website to invest. The person seeking the funding will present their business online and set a funding target, and then those interested in the business can invest their money should they wish.

Is it Effective?

In short, crowdfunding’s success speaks for itself, and there have been many business success stories which have started with a crowdfunding pitch. For those with an appealing business model/plan and the drive to succeed, there is plenty of scope to acquire funding through crowdfunding websites, and there are many people from around the world willing to invest in a promising business.

As such, it is incredibly effective, especially for those entrepreneurs who may find it more difficult to find funding through a traditional lender. The fact that the entrepreneur is only charged if their target is met is another key benefit of crowdfunding.

Why is it so Popular?

There are numerous possible reasons that crowdfunding has become such a phenomenon in the modern era. Part of the reason is that it embraces new technological trends by using the online sphere to connect people with entrepreneurs, and gives both newfound opportunities to make money.

Another reason is that it is a great alternative to regular lenders, many of which (mostly banks) have shut their doors to small-time entrepreneurs. In fact, crowdfunding can work out much cheaper for the business owner in the long run, and even could help them to gain access to a customer base (their investors) before they even market their service/product.

There is no doubting that crowdfunding will continue to grow and evolve as a global phenomenon, as it gives business owners untold opportunities to get their business up and running, and gain a good amount of publicity in the process. With this in mind, it will interesting to see which crowdfunding models become available to investors in the near future.