Crowdfunding has become an increasingly popular financing alternative among entrepreneurs. We tell you what Crowdfunding models are available and how do these models help you in your campaign:
“All or Nothing” or “whatever you get”
The most common among Crowdfunding models is “All or Nothing”. It is that you stay with the funds only if you have managed to collect the minimum amount requested for the given date. It is quite common for projects to raise above this minimum and to add more ambitious targets staggered during the campaign. But if you do not get to the minimum there is nothing.
In the other case, you stay with whatever you have achieved, regardless of whether or not you reach that minimum.
The first model gives more confidence to potential contributors as in this you give the feeling of greater commitment on your part. In addition, commissions of the Crowdfunding platform on “All or nothing” model tend to be lower for. Not to mention that many projects really cannot get anywhere without this minimum. Perhaps this is why the “All or Nothing” system is the most popularized.
Donation Based Crowdfunding:
It corresponds mainly with initiatives of solidarity or humanitarian style to raise funds. You give nothing in exchange for what you receive. It is the gift of a lifetime. This model is often combined with “you get what you get” from the previous option.
The main characteristic of this type of platforms is that the economic contributions do not carry a consideration or reward, but the donors do it because it is a beneficial cause.
Investment or Equity:
It is not the widely used option (and even less in the cultural field) but deserves a mention. Participation is when the contribution works as an investment i.e. in exchange for their money, the patrons receive a percentage of the company shares in which they invest, depending on the amount contributed.
In practice, this model requires a lot of regulation because the investors become partners that will be able to give an opinion on the future of the company.
Loan or Lending:
In this model, the support is received in the form of a p2p loan (between pairs) that you commit to repay with interest. Those who opt for this form of financing offer an interest rate on the money they receive for their project.
Therefore, each investor receives the amount he contributed as consideration plus a certain interest rate that at times can even be fixed by himself.
As its name implies, those who finance projects through this model receive a consideration. The rewards are defined by the entrepreneur who needs the money and are of the most varied types. The rewards presented in the Crowdfunding campaign can be one of the two types:
- Symbolic: In exchange for the contribution you give your supporter a symbolic sample of your appreciation. For example, an autographed photo or prominence in the credits of the movie. In this case, the contributors motivate them to see a certain project come true, be it a restored work of art, an equipped square, a modernized museum.
- Actual: here, in this case, you give your contributor a copy of your final product/ project you are raising funds for i.e. a copy of the book or disk etc.
Classification of Rewards:
- Digital: usually the download of some type of file, be it the book, disk, etc.
- Experiences: like a Skype conversation, a special thanks, tickets to an event, participation in the movie, etc.
- Services: You can give them a painting class, an excursion, etc.
- Product: it can be the product you are asking funds for or any other symbolic product
To attract more investors, in recent years, it is usual to offer a percentage of the estimated benefits of the project, but not a stake in the company. This, in addition to being more attractive to patrons, also helps validate the business because the entrepreneur gets an idea of how many people are convinced that their idea can succeed in the market.