Defining The Types Of Crowdfunding

There are various types of crowdfunding which you need to know before getting indulged into it. Which type of crowdfunding will suit you depends on the type of product or service you offer and also, your goals for growth.

To know about the various crowdfunding platforms available in the United Kingdom, you can get redirected here.

3 main types of crowdfunding platform are:

  • Donation-based
  • Reward-based
  • Equity

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The most common types of crowdfunding fundraising are using sites where donations are required in exchange for a special gift. That could mean a free product or even the opportunity to be involved in designing the product or service.

Donation-Based Crowdfunding

Broadly speaking, you can think of crowdfunding campaign where there is no financial benefit to the investor or donation-based crowdfunding contributors. General donation-based crowdfunding initiatives including fundraising for disaster relief, charities, nonprofit organizations, and medical bills.

Rewards-Based Crowdfunding

Rewards-based crowdfunding involves individuals contribute to your business in exchange for "gifts," usually in the form of products or services your company offers. Although this method offers reward supporters, it is still generally regarded as part of donation-based crowdfunding because there is no financial gain or equity.

Equity-Based Crowdfunding

In contrast to the method of donation-based and fee-based, equity-based crowdfunding allows contributors to become part-owner of your company with shares trading on the equity capital. As owners of equity, your contributors receive a financial return on their investment and ultimately receive a share of the profits in the form of dividends or distributions.