How Does Crowdfunding Work?
Modern crowdfunding is typically achieved through the use of online funding portals. Individuals provide payment details to make contributions to a crowdfunding effort, also referred to as a “campaign.”
Depending on the type of campaign, payments may either be charged immediately or “pledged” until such time as the campaign reaches its financial goal to become fully-funded.
Who can use crowdfunding?
Individuals, charities, nonprofits, local agencies, and companies looking to raise capital can all start their own crowdfunding efforts using the various platforms available online.
Crowdfunding has been used to raise money for humanitarian relief efforts, emerging technologies, creative endeavors, community building projects, and much more.
Major Types of Crowdfunding
There are a few major classifications of crowdfunding: Donation-based, Reward-based, and Equity-based. Crowd9 offers assistance with crowdfunding campaigns launched on Reward-based and Equity-based platforms.
Donation-based
Donation-based crowdfunding is when a project creator accepts funds without offering anything in return. The most common examples of donation-based crowdfunding include raising for charities, nonprofits, or personal objectives.
Reward-based
Reward-based crowdfunding is when a project creator offers non-equity rewards in return for pledges from backers. Rewards are typically offered in a tiered structure, with better perks available for backers that offer higher pledges of financial funding.
Equity-based
Equity-based crowdfunding is when a project creator offers equity in return for an investment in their project or company. Equity crowdfunding has strict requirements, as offerings are regulated by the U.S. Securities and Exchange Commission.
Supported Platforms by CF Type
| Platforms by Fundraising Type | Charity or Personal Cause (donation-based) | Creating a Product or Service (reward-based) | Offering Equity or Investment (equity-based) |
|---|---|---|---|
| GoFundMe | ✓ | ✗ | ✗ |
| Kickstarter | ✗ | ✓ | ✗ |
| Indiegogo | ✗ | ✓ | ✗ |
| WeFunder | ✗ | ✗ | ✓ |
| StartEngine | ✗ | ✗ | ✓ |
| Republic | ✗ | ✗ | ✓ |