Crowdfunding as the name suggests is the pooling of resources (small amount) from multiple investors for a common goal. It is one of the most social categories of alternative financing, which has emerged outside of the traditional financial system.
The crowdfunding awareness level across the globe has increased significantly over the recent years. By 2025, the crowdfunding industry is projected to grow over USD 300 billion.
A large number of global crowdfunding platforms are available where young entrepreneurs can raise the funds online for their ventures. The most popular online global platforms that promote crowdfunding are; Kickstarter, Indiegogo, Gofundme, Razoo, RocketHub, Crowd-funder, and Angellist etc.
India with its huge market has now become a popular destination for global businesses and other investments. In India, there are many emerging crowdfunding platforms, such as Milaap, Bitgiving, Crowdera, Ketto, Wishberry, and Catapooolt etc.
Types of Crowdfunding Are
- Rewards Based
- Donation Based
- Equity Based
- Lending Based
Benefits Of Crowdfunding For Startups
Crowdfunding has a ton of benefits to new startups, small enterprises, profit and non-profit organizations and other users in the real economy. Crowdfunding has greater geographic reach, efficient market, and alternative source of financing globally at a lower cost of capital for startups and SMEs. It has the potential to create employment and generate capital investment or funds for the creative project, public-interest cause, or enterprise by acquiring funds from multiple sources.It creates opportunities for increasing capital and liquidity for entrepreneurs at each stage of their growth cycle. Various crowdfunding platforms open the doors to startups for finding the right business and right investor from online crowd.
When an idea has a potential to generate revenue and need financial support to become a reality in the future, crowdfunding is adopted by the entrepreneurs.
Crowdfunding plays a major role in the growth of a nation’s economy. However, It encourages the professionals and entrepreneurs to their new startups by providing multiple sources of funding. If startup companies and small enterprises grow and generate revenues, it will definitely boost the economic growth of a nation.
How Crowdfunding Impacts On The Growth Of An Economy?
To access the capital from the online crowd is challenging for small and mid-sized enterprises (SMEs). However, crowdfunding provides access to pool contributions from across the globe. It acts as a catalyst for renewed relationships. Crowdfunding is helpful for filling the huge gap in funding for local businesses. Startup companies can use it for accessing more investors with less administrative burden.
The growth of crowdfunding is increasing at a tremendous rate which clears that it is not just a passing trend. Crowdfunding has several opportunities for startup companies to succeed. Successful businesses mean more employment and more income for their surrounding communities. Our economy will definitely grow with the success of our entrepreneurs which can ultimately lead to an upgrade of our social and physical infrastructure.
Cross-border Crowdfunding can be a powerful tool to expand the quality of life globally. Investments in new technologies may improve the economic growth of developing and developed nations.