Home » Glossary » What is Business Crowdfunding

What is Business Crowdfunding

Business CrowdFunding is thought to go back over 20 years

It seems to be that Crowdfunding is the latest way to raise money for your business. The first Crowdfunding is thought to go back to 1997 when the band Marillion struggled to fund a US tour. Fans apparently used the internet to come together and raised $60,000 to enable the tour to go ahead.
Since then Crowdfunding has hugely grown in popularity and is now a significant “go-to” method for startups and growing business globally.

So what is it?

Essentially Crowdfunding is a way of raising business finance by obtaining smaller amounts from a large amount of people.

The idea is simple but fantastic, as the risk to each investor can be minimised by the low value of investment to enter into the fund. 

There are 3 main types of Crowdfunding;

Equity Crowdfunding

People invest in an opportunity in exchange for equity in the business. Money is exchanged for a shares, or a small stake in the business, project or venture. As with other types of shares, apart from community shares, if it is successful the value goes up. If not, the value goes down.

Donation / Reward Crowdfunding

People invest simply because they believe in the cause. Rewards can be offered (often called reward crowdfunding), such as acknowledgements on an album cover, tickets to an event, regular news updates, free gifts and so on. Returns are considered intangible. Donors have a social or personal motivation for putting their money in and expect nothing back, except perhaps to feel good about helping the project.

Debt Crowdfunding

Investors receive their money back with interest. Also called Peer-to-Peer (p2p) lending, it allows for the lending of money while bypassing traditional banks. Returns are financial, but investors also have the benefit of having contributed to the success of an idea they believe in. In the case of microfinance, where very small sums of money are leant to the very poor, most often in developing countries, no interest is paid on the loan and the lender is rewarded by doing social good.

You can Crowdfund in many ways, but the most popular (and safe for investors) is to use  Crowdfunding platform. We have listed a few here for you to review:

Crowdcube helps startups and growing businesses to raise business finance by letting people invest via their equity crowdfunding platform.tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Seedrs is a leading online platform for investing in startups and is open throughout Europe. We allow investors to invest as much or as little as they like in startups they choose, and we handle all the paperwork and manage the shares as nominee on their behalf. Seedrs is authorised and regulated by the Financial Conduct Authority.

GrowthFunders is an online equity-based crowdfunding and co-investment platform, we match entrepreneurs, who have great ideas and potential, with investors who are looking to build strong investment portfolios. We also have professional partners who work alongside entrepreneurs to ensure that their businesses are investor-ready.

As with any type of Investment there are risks and whilst we are advising on Crowdfunding in principle, we are not responsible for any decisions made to raise or invest with Crowdfunding.

For more information on how our Semantic Technology Consultants can help your business make informed decisions for growth, contact us today.

We will arrange an initial call back, talk through options and discuss the next steps.