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Current Issues Affecting Your Money

All About Crowdfunding

All About Crowdfunding

Have you ever heard of crowdfunding? It’s all over the news. Actor LeVar Burton raises over $2 million for Reading Rainbow project. Couple uses crowdfunding to afford fertility treatments. Families of missing airliner passengers set up crowdfunding campaign to help them find answers.

Clearly crowdfunding has lots of applications, but many people have questions about crowdfunding. What is it? Should I contribute to a campaign? And, can I use it to raise money?

What is crowdfunding?

Put simply, crowdfunding is just what it sounds like, a crowd of people providing funds. There are two principal types of crowdfunding: donation and investment. Donation-based campaigns ask backers to make a gift. In return, backers may or may not receive some kind of benefit such as a pre-release copy of a creative work or a prototype device. Sometimes the larger the donation is the larger the benefit. With donation campaigns, the backer generally only receives a one-time benefit. There is no ongoing relationship established between the sponsor and the backer.

There are many websites devoted to donation campaigns, and campaigns are set up for a variety of purposes. For example, they may be charitable, political, or commercial, and they can be set up by individuals or businesses.

The second type of a crowdfunding campaign is investment. In this type of campaign, a backer receives a stake in the business in return for their contribution. These campaigns provide backers with the potential for financial gain.

Should I contribute to a crowdfunding campaign?

With so many different kinds of campaigns, there is no straightforward answer regarding whether or not you should contribute to one. It really depends on what your goals are. The key is to understand what type of campaign you’re contributing to and what you will receive in return before making a decision.

Can I use crowdfunding to raise money?

The short answer is maybe. The trick to crowdfunding, like raising money in more traditional ways, is to give people a compelling reason to contribute. Successful campaigns frequently have an emotional appeal or a strong tangible benefit. Identifying what it is you have to offer backers, not just why you want the funds, is crucial to deciding whether crowdfunding is for you. Furthermore, potential backers will want a clear picture of what it is you will do with their funds. Crowdfunding is not just easy money. Campaigns take time and energy to set up and to promote.

Again, there are numerous crowdfunding websites. Perusing these sites can help you find a campaign to contribute to or the right place to host your campaign.


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