HomeQuick ReadsCrowdfunding: Definition, Types, and Benefits for Your Business

Crowdfunding: Definition, Types, and Benefits for Your Business

Crowdfunding creates an opportunity for a business person to raise substantial funds from anyone who wants to invest funds in the idea of business being offered. Along with the rapid development of technology, various creative and innovative ideas are increasingly emerging in the business world.

Of course, it increases productivity in the business that is being undertaken. However, this creative and innovative idea is not enough in the business world if it is not included by venture capital. Capital is the foundation of a business. If the installed foundation is not strong, then the company will not support all its contents properly. 

The method that is now quite commonly applied to capitalize on this various creativity is crowdfunding. Crowdfunding is a method of raising capital through the collective efforts of friends, family, customers, and investors. This approach utilizes the collaborative efforts of some individuals through the internet based on a network of platforms or social media crowdfunding as a means of greater outreach.

What is Equity Crowdfunding?

Source: suara.com

Equity crowdfunding is raising funds for a project or venture by some people, usually done through an online platform. The Equity Crowdfunding system is like buying shares, so it is different from the peer-to-peer lending system, which only lends funds. 

Equity crowdfunding (ECF) is almost the same as a capital investment in the capital market. Some issuers or companies offer shares, providers of crowdfunding services, and investors. The difference is that the issuer is offering shares with the ECF system to sell shares directly to investors through an online electronic system. Those given the disbursement of funds are called the issuer, a start-up company with a total capital of not more than 30 billion and is not a public company.

Reporting from Investor.id, the publisher must also be in the form of a Limited Liability Company (PT) and not a company controlled either directly or indirectly by a business group or conglomerate. The issuer will make an offering of its company shares through a crowdfunding service provider. After that, investors can buy shares of the company that was offered at that time.

Sharia Crowdfunding

Source: unair news 

Sharia crowdfunding is a crowdfunding platform designed to meet sharia principles, a collective effort (individuals and or organizations) to collect or raise funds to fund projects (including startups), provide personal or business financing, or other needs through an internet platform following sharia principles. 

Sharia crowdfunding uses a sharia contract between the giver and the recipient of the financing. This contract does not use interest or other usury-related matters. In addition, the object and purpose of the funding being funded is also something that must comply with sharia principles.

Types of Crowdfunding

In general, there are three types of crowdfunding that you can apply. Here are the types you need to know; 

Donation-based

This type of crowdfunding is in the form of a fundraising campaign for humanitarian issues such as education assistance, victims of natural disasters, and charities. However, the owners of capital who have participated cannot be refunded from donations. 

Reward-based

In this type, investors will get rewards in the form of prizes for company products or services.

Equity-based or investment

Unlike the previous two types, this type promises a return on capital in the form of equity shares. The owners of money can become part owners of the company and get a return on their investment.

Also read: 5 Advantages of Cloud CRM for your Business

Crowdfunding Benefits

In addition to easy access, enter a more extensive network of lenders on the online platform. Crowdfunding also has several benefits that are many and  help your business, such as: 

The most important use: wider reach

The crowdfunding platform makes it easier for business owners to find investors interested in developing funds, then crowdfunding can also facilitate interaction and share campaigns related to fundraising.

Opportunity to do the business introduction

Crowdfunding can help broaden your business introduction from your fundraising campaign by providing information that highlights the business you are building. For example, the attractiveness offers target market to the value of the company. 

Another benefit of crowdfunding is marketing

You can share crowdfunding fundraising campaigns from various channels and platforms, such as social media, email, to other marketing strategies. In addition, when you monitor crowdfunding campaigns, you can also market your business website to potential investors. 

Concept validation

Next, the thing to do is to introduce the concept of your business or business. Explaining your business concept to the public will provide an excellent opportunity to improve the idea of your business offering. When potential investors are interested in funding your company, you can directly convince them to help your business. 

Conclusion

Crowdfunding can be an alternative way to get your business capital because crowdfunding creates an opportunity for a business person to raise substantial funds from anyone who wants to invest funds in the idea of business being offered. 

Crowdfunding projects are share-based, meaning that investors can become shareholders and receive dividends. Then, there is also reward-based, which means that investors will get products from the funded project when launched or get a prize from the investment given.


HashMicro is a company that provides ERP Software for Project-Based Industries. ERP System for Project-based Industry allows you to manage projects efficiently, process all progress, and absorb the budget optimally to ensure that the project is completed as planned.

Interest in getting savvy tips for improving your business efficiency?

Annastasya Berliana Dunda
Junior content writer at HashMicro's Company. If you have any questions or cooperation please kindly contact my email. My email: [email protected]

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