What Is Crowdfunding?

Learn about this practice that can help turn your big ideas into reality

Over the last ten years, the concept of crowdfunding has evolved considerably, becoming one of the practices that generates the most funding around the world. In the beginning, it was a way to support a cause through donations. However, today, big projects have come into existence thanks to this practice: from music productions and films to the launching of start-ups that have revolutionized industries.

Below, Juan del Cerro–a top promoter of entrepreneurship in Latin America and director of Disruptivo.tv (@disruptivotv)–talks through using this innovative method to make the most of your network of contacts and turn your big ideas into reality.

What is it?

Crowdfunding is a practice that allows you to finance projects with the support of entire communities. It is based on the idea that it is much more difficult to get one person to invest a huge sum than it is to get people from your intimate circle (including friends, family, collaborators, coworkers, followers, etc.) to support you with smaller sums that, when added together, meet the target you need to finance your project.

What do I use this practice for?

As Juan explains, it doesn’t matter what the project is (recording an album, starting a business, or covering the costs of a trip that is necessary to fulfill part of your creative process), any objective can become a crowdfunding campaign. The essence of this practice is to ensure that funding is never a barrier when it comes to achieving our goals and that nobody has to depend on big investors in order to get a project off the ground.

How complicated is it?

Implementing a crowdfunding strategy might sound complicated, however, if you stop and think, it’s something that you’ve probably done before at some point in your life (such as when you and a group of friends organize splitting the check, for example).

What sets this practice apart, is that today, given advances in technology, it is all carried out on digital platforms. This increases the reach a campaign can have, enabling someone to raise thousands or even millions of dollars to put their project in motion.

Types of crowdfunding

Juan summarises the different types of collective fundraising activities that are available so that you can find the one that will suit both yours and your professional and personal projects’ needs:

Donation

This means supporting a cause without receiving anything in return. It’s commonly done for the purpose of medical procedures or the sustainability of foundations with socially responsible objectives. Gift tables at social events also fall under this category. One of the most important platforms for this type of crowdfunding is Donadora.

Rewards

Unlike the previous type of crowdfunding, those who participate in this one will receive rewards (from a physical gift to a symbolic thank you from the project’s official members). An example could be raising funds to record an album and gifting those who invest a copy of the album when it’s completed. It’s ideal for pre-sale strategies. Kickstarter is the main platform for this type of crowdfunding.

Equity

With this type of crowdfunding, the participant becomes part of the creation of the company and receives stocks in return. This is a type of investment that helps you to find partners for your projects. Play Business is a good example of one of these types of platforms.

Subscription Service

This is ideal for projects with recurring costs, such as podcasts that launch campaigns to enable listeners to make donations to cover the production costs of each episode. Patreon is the leading platform of this type.

Loans and Credit

With this type of crowdfunding, the recipient of the funds is obliged to pay the amount back to the participant. It works in the same way as a loan. Unlike the equity funding platforms, the person who takes part doesn’t receive more than the sum that they contributed in the first place, so they don’t get any extras. One website that offers this service is Kubo Financiero.

If you want to learn more about this topic and discover exactly how this tool can help get your ideas underway, sign up to the course, Creating Crowdfunding Campaigns from Scratch, in which Juan del Cerro will provide you with all the information and the best advice so that you can make the most of what crowdfunding has to offer.

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