Comparison of crowdfunding services

Crowdfunding is a process in which individuals pool money and other resources to fund projects initiated by other people or organizations. Crowdfunded projects may include creative works, products, nonprofit organizations, supporting entrepreneurship, businesses, or donations for a specific purpose (e.g., to pay for a medical procedure). Crowdfunding usually takes place via an online portal that handles the financial transactions involved, and may also provide services such as media hosting, social networking, and facilitating contact with contributors.

Funding models

Crowdfunding is donation-based fundraising for businesses or creative projects, typically via an online funding portal. Some but not all crowdfunding projects offer contributors rewards, which may differ based on the amount of money donated. Rewards can include copies of a creative work, products created with the funding, special or personalized incentives (such as autographed works or promotional merchandise), or public recognition.

In equity crowdfunding, a crowdfunding approach is used to raise investment capital and contributors receive equity in the resulting business. Contributors may act as investors and receive shares directly, or the crowdfunding service may act as a nominated agent.^[1]

Donations and/or Rewards

There are two basic models provided for – some sites offer a choice between them:

• All or Nothing (AoN) – When the fund-raising period is over, money is only collected from the contributors if a pre-determined minimum amount of money has been pledged. If the goal is not met, no money is collected.
• Keep it All (KiA) – Whether the project goal is met or not, all of the funds collected (minus commission) are handed over to the entrepreneur. If he or she has insufficient funds to meet the objectives, then it is up to the recipient to refund them to the contributors.

Donations only

Some services invite people to donate to projects for the pleasure of giving. Philanthropy based services usually have other benefits such as tax credits or rebates.

Money for business ventures

Crowdfunding can be used to raise capital (equity) or borrow money. While organized informally, they typically involve large numbers of small investors or lenders:

• Equity crowdfunding – Investors receive equity in the company or entrepreneur that is raising funds.
• Debt crowdfunding – The entrepreneur or company borrows money and must repay it (typically, with interest).
• Property crowdfunding - Investors receive interest in the property from an owner who is raising funds.
• Other crowdfunding – There are a number of other schemes in use which are generally unique to particular services, e.g., perks, publication, or rewards.

Continuous funding

Some services allow for a continuous funding model as opposed to a one-time donation. These tend to apply to, but are not limited to, art projects such as music, YouTube videos, podcasts, web-comics, etc. — anyone who makes content on a regular basis. They differ mainly in the frequency in which payments are charged to the funders.

Post-creation services

Some services invite people to reward creators after they already published their work.

See also

• Peer-to-peer lending

References