Do you know what crowdfunding is? We were surprised that five out of ten people randomly asked on the street knew about it even though sometimes they didn't recognize the name at first. We can't conclude that half of the population does not know about crowdfunding since it is not a representative sample of the population but we will assume some people does not know about it and it is worth it to dedicate a post to the topic. Crowdfunding is the innovation in the funding business model where instead of looking for business angels or venture capitalists who normally invests big money to ideas, project and startups, the common people is empowered. Anybody can invest in a project or an idea they like normally starting on a minimum quantity of 5 to 50€. In the case of Spain, for people who are not official investors, there is an investment limit: 3000€ maximum per project and 10000€ maximum per year. We have not checked how are laws in other countries but we invite you to share with us what is going on in your countries.So basically, crowdfunding is materialized in platforms where you can check projects or ideas and choose where you want to invest. Some crowdfunding platforms are like donations: you don't actually get any return on investments as if you were investing in the stock market. You may receive a goodie or the first product but that's it. Other crowdfunding platforms are like investing in startups at a small-scale (also known as Equity Crowdfunding) and you actually get your money back and a return on investment only if the project is successful. Finally, there are crowdlending platforms which have really similar functionalities to crowdfunding platforms but they have a completely different scheme. You are more a bank than an investor, since you lend the money in exchange of a certain interest rate your are going to obtain and you are going to receive your loan back with periodically payments.Comparing equity crowdfunding with crowdlending, the largest difference is clear: risk. With crowdfunding you don't have guarantees since you just bet for the project and the team who is pursuing it and you don't have a fixes return on investment, it will depend on the project/idea/company performance. On the other hand, in crowdlending there is a contract where you will receive money back under certain conditions, independently of the project/idea/company performance.Finally we would like to invite you to nose through some of the crowdfunding platforms we love:
- Kickstarter: one of the largest and first crowdfunding platforms (donations in exchange of goodies or product).
- ECrowd: a crowdlending platform focusing on projects with positive social or environment impact.
- Crowdfunder: an equity crowdfunding platform where to enable the crowd to invest in game-changers entrepreneurs.
Do you recommend other platforms? Please share them with us :)