Crowdfunding is a method of raising money online from many donors or investors. There are over 450 crowdfunding platforms across four main types: reward-based, donation-based, equity-based, and lending-based. Crowdfunding offers benefits like early feedback and marketing, but also risks like damaged reputation if goals are not met.

1. Crowdfunding
Presented By :Israel Fitsum
Mukhtar Saeed

3. What is Crowdfunding?
➔ Crowdfunding is a method of raising money online
through the support of many different donors.
➔ Crowdfunding is often the platform of choice for small
business start-ups, artistic projects and charitable
endeavors looking to reach a global audience.

5. Crowdfunding is converting social capital into actual
capital through the internet.
There are more than 450 crowdfunding platforms currently
in existence and a World Bank report stating that revenue
from this method could reach $96 billion by 2025.
Many people (“the crowd”) contribute or invest a relatively
small amount of money ($10, $100, $500, …) that
collectively totals large sums.

6. This funding method offers big benefits to Startups that
can raise capital while expanding their base of
supporters who now have a vested interest in the
company’s success.
They may also benefit from the feedback of early fans to
refine solutions, strategy or messaging.

7. Those who contribute or invest in these campaigns may
also see big benefits while getting to support a great
cause or invest early in an idea they believe will make it
big. (Ever wished you could have invested in Facebook
when it was a Startup? We have, too.)

8. Crowdfunding History
● Crowdfunding has a long history with several roots.
● Books have been crowdfunded for centuries: authors and publishers
would advertise book projects in prenumeration or subscription
schemes.
● The book would be written and published if enough subscribers
signaled their readiness to buy the book once it was out.

9. Crowdfunding and the Internet
● Crowdfunding on the internet first gained popular and mainstream use
in the arts and music communities.
● The first noteworthy instance of online crowdfunding in the music
industry was in 1997, when fans of the British rock band Marillion
raised US$60,000 in donations by means of an Internet campaign to
underwrite an entire U.S. tour.

11. Successful campaigns take at least 3 months of pre-launching activities before
they launch their project. There are 9 stages of crowdfunding :
★ Business Planning
★ Intellectual Property
★ Social Media
★ Public Relations
★ Campaign Strategy
★ Networking
★ Team Building
★ Website Development
★ Profile & Video

12. Types of crowdfunding platforms
There are four (4) types of crowdfunding platforms that
are generally categorized by what the backers get in
return for their money.
1. Reward-based crowdfunding - in return for their
money backers will get some sort of reward.

13. ...
It could be a book with a personal dedication in a
crowdfunding campaign to publish a book or tickets to the
premiere in a crowdfunding campaign for a movie production.
Kickstarter, Patreon (and Patreon alternatives) and Indiegogo
are well-known reward-based crowdfunding platforms.

15. ❏ Kickstarter is one of the biggest names when it comes to
crowdfunding, known for helping tech and creative
entrepreneurs fund their projects before getting a loan or
raising money for venture capital. The company has
raised over $5 billion with more than 189,000 (as per
October 2020) projects funded since its inception in 2009.

16. 2. Donation-based crowdfunding - people who back
these kinds of campaigns are more donors than
backers. They do it for the cause, to raise money for a
sick person, or to save animals. This is crowdfunding
for nonprofits. Most donation-based campaigns are
flexible campaigns. You’ll find such campaigns on
platforms like GoFundMe and Indiegogo which also
offers the flexible model.

18. GoFundMe
a crowdfunding platform designed for individuals and
personal causes. No all or nothing requirement and
reasonable fees.
This site is a good option if your fundraiser goes towards
a service-based cause, such as medical needs or
emergency relief.

19. 3. Equity-based crowdfunding - this type of
crowdfunding enables businesses to raise money
from the public in return for equity in the company.
The backers get shares.
Republic, Seedinvest, Crowdcube, and Wefunder are a
few examples of such platforms.

21. Wefunder
Wefunder is one of the few equity crowdfunding platforms
that open up the world of investing to anybody seeking to
invest in a startup company.
Wefunder collects 7.5% of what you raise if your
campaign is successful.

22. 4. Lending-based (Debt) crowdfunding - this type of
crowdfunding is different from all the above. People
can get loans from the public instead of banks in
return for interest. LendingClub is an example of
such platforms.

24. LendingClub
LendingClub is a giant in the peer-to-peer lending
community. Since it was founded in 2007, it has issued
$50 billion in loans and connected more than three
million borrowers with investors. LendingClub is
reportedly open to working with borrowers who have fair
credit scores (starting at 600 and up).

25. So to recap…
1. In rewards-based crowdfunding, backers give a small amount of
money in exchange for a reward.
2. In donation-based crowdfunding, donors donate a small amount of
money in exchange for gratitude and the feeling of supporting a
cause they believe in.
3. In equity crowdfunding, investors invest large amounts of money
in a company in exchange for a small piece of equity in the
company.
4. And in debt crowdfunding, lenders make a loan with the
expectation to make back their principal plus interest.

27. Advantages and disadvantages of crowdfunding
There are a number of factors that you might want to
consider.
Advantages
● it can be a fast way to raise finance with no upfront fees
● pitching a project or business through the online platform
can be a valuable form of marketing and result in media
attention

28. ● Sharing your idea, you can often get feedback and
expert guidance on how to improve it.
● It is a good way to test the public's reaction to your
product/idea - if people are keen to invest it is a good sign
that the your idea could work well in the market
● investors can track your progress - this may help you to
promote your brand through their networks

29. ● ideas that may not appeal to conventional investors
can often get financed more easily
● your investors can often become your most loyal
customers through the financing process
● it's an alternative finance option if you have struggled
to get bank loans or traditional funding

30. Disadvantages
● it will not necessarily be an easier process to go through
compared to the more traditional ways of raising finance
● when you are on your chosen platform, you need to do a
lot of work in building up interest before the project
launches - significant resources (money and/or time)
may be required

31. ● if you don't reach your funding target, any finance
that has been pledged will usually be returned to your
investors and you will receive nothing
● failed projects risk damage to the reputation of your
business and people who have pledged money to
you

32. ● if you haven't protected your business idea with a
patent or copyright, someone may see it on a
crowdfunding site and steal your concept
● getting the rewards or returns wrong can mean
giving away too much of the business to investors