Crowdfunding is a model of financing that is gaining traction in current times, mainly due to the improvements in science and technology. Though most people view it as a modern idea, crowdfunding has been present in most parts of the world in one way or the other. An example of this is in 1850 when a campaign was started to raise funds for the French philosopher, Auguste Comte.
Though crowdfunding is generally amorphous, the Crowdfunding Center has come up with a way to classify the different types. One of these is rewards crowdfunding, where the entrepreneurs presell the product to clients without having to go into debt. For instance, when designing a new product, one could source funds from the public, and provide them with the finished product in future either for free or at a discount.
The other major type is equity crowdfunding. In this model, the backer (the individual providing the funds) receives a share of the company in exchange for the money. Normally, the number of shares once receives depends on the amount they gave.
Crowdfunding is an attractive way to raise funds for many projects since it usually does not attract as much interest as other sources such as bank loans. In addition to that, the terms at which the money is gotten is usually much more lenient. This means that the company ends up facing much less risk.
The only issue to look out for when developing a crowdfunding campaign is ensuring that it conforms to the legal provisions in the jurisdiction of the company. It is a good idea to involve a lawyer in the process of coming up with the campaign.