Crowdfunding has now become a tool utilized for start-ups to support their ventures for gathering tiny sums of capital from people across the world on a single online site. This large public audience consists of registered buyers and individuals who are unattached by either business or investment firm.

Crowdfunding is distinct from that. It is different from the conventional method of providing investors with high amounts of equity shares. The organization would not actually have to divide equity by crowdfunding.

TYPES OF CROWDFUNDING

Depending on the type of fundraising, investors can get different benefits or none at all. There are four big forms of crowdfunding. Donation-based, reward-based, equity-based crowdfunding and initial coin offering

DONATION-BASED CROWDFUNDING

Donation-based crowdfunding is not usually linked to the entrepreneurial world. You will use this option to raise the money for personal purposes. More recently, Facebook has been more involved in charitable and large-scale fundraising.

These contributions are philanthropic covering costly surgeries related to medical problems, voluntary organisations, colleges or supporting citizens in developed countries. In this situation, the investors or lenders get essentially little in return for their investment, other than the pleasure of doing a good deed.

Goodworld is a company that aims to turn the donation phase into a simple three-step process. The first move is for anyone to respond or comment on # donate on social media, and a pop-up screen will appear with a sign-up form that only includes your credit card information and your name. It's short and simple.

REWARDS — BASED CROWDFUNDING

This form of fundraising is mainly made up of entrepreneurs in the pre-sales period who are searching for approval of their product or service. The donors are incentivized to contribute more and faster in exchange for a dividend.

The incentives can differ based on the form of company. Contributors may obtain small presents as a token of goodwill. For starters, “donate $50 and obtain a branded t-shirt, mug, pen and poster.”

Often Kickstarter projects provide more elaborate presents with a larger donation. For example, flying out to meet the founders, a chance to get a "shout" on their website, or a press release

You can get crazy, imaginative, and gimmicky with your rewards. An example is the anime movie named “In the Name of the Sea: A Sailor Sea Documentary”. The filmmakers promised to insert the name of the sponsors in the credits if they contributed more than Rs 5.

What most buyers are searching for in this group is early access to the product or prototype, since they are typically known since early adopters.

Investors (outside of getting the commodity itself) seldom get a direct gain on these projects, although they will be credited with equity if they contribute large sums. This ensures that there is a small chance other than that of not performing on the reward-based commitments.

An example of this is Bristly on Kickstarter Petros Dertsakyan has developed a specially made toothbrush for dogs. In exchange, the supporters were granted early access to the product.

Under any scenario, the sooner you donate, the more you donate. The largest kit contains 48 brushing sticks with a minimum donation of RS 349. The campaign is really good, and the dog owners enjoy it. The project managed to surpass the Rs15.000 target by collecting Rs 263,990 from 6,178 supporters.

EQUITY — BASED CROWDFUNDING

There is a stigma that those investing in startups belong to the white collar community and those with a high disposable income. But in fact, everyone can now invest in the funding of a start-up.

Equity-based crowdfunding opens the way for individuals to invest money in a company they believe in. In return for capital, they have the right to acquire stock in your business. There are called assets (albeit risky) and there is a chance to make a return or to lose all the money invested.

It is the best way to create a bridge between individuals and businesses. This method of crowdfunding helps people to follow the start-up journey and be part of the transition.

Apex Farms is the start-up of a vertical farming method to provide farmers the ability to grow more and reduce water use by 75%. They also posted their initiative on Micro Ventures, and an investing website specifically built for equity-based crowdfunding.

The minimum expenditure for XYZ Company is 50,000, which includes the expense of raw materials construction materials, labour, separate fees and promotion. Currently, they have managed to raise 2,07,000 from 659 investors.

This means that individuals ought to pay a larger sum of money in order to earn the company's shares. In addition to financial gains, consumers often have early access to the product.

INITIAL COIN OFFERING ICO:

The concept of cryptocurrency is becoming more popular and recognized as a major game changer for investment and banking in the future. It is a modern form of payment that may be used to support programs.

This modern method of collecting funds is called ICO and is mainly utilized for entrepreneurs. They build a cryptocurrency and embrace other cryptocurrency in return, typically Bitcoin or Ethereum, instead of accepting conventional money donations.

This approach is both a reward-based strategy and an equity-based strategy. Backers can obtain cryptocurrency, or keys, instead of securities.

Many investors think this strategy dangerous, since there is no certainty the tokens will increase in value over time. The rules are very limited, which carries with it another chance of the business vanishing with your tokens overnight.

Energy Premier is a start-up that creates "a quicker, easier, cleaner way to trade power." Their token is named EPC (Energy Premier Coin) and is exchanged for a minimum of 0,1 BTC (Bitcoin) or one ETH (Ethereum). The amount of one EPC is 0,0003. This token enables customers to trade electricity on a platform where electricity tenders will take place starting in September of this year.