Crowdfunding can offer unique support for budding and existing entrepreneurs on multiple levels.
No other investment form, be it debt or equity, can provide the benefits of pre-sales, market research,
word-of-mouth promotion, and crowd wisdom without additional cost.
Donation-based crowdfunding helps not-for profit organisations to fund projects and core costs, but it can
also help to fund creative activities and common purpose activities. Both debt-based crowdfunding and
peer-to-peer funding help smooth consumption and income fluctuations, and can provide SMEs funds for
business expansion, production, and other activities. This is a compelling alternative to traditional lending
products.
Reward-based crowdfunding is frequently used for creative businesses or smaller consumer products, where
basic pre-financing for production is linked to an initial demand-test. If a sufficient number of people
enter into a funding agreement, the entrepreneur has market validation as well as the pre-financing for his
activities.
And finally, equity-based crowdfunding offers an additional route to raise equity for any business venture,
with all associated risks. Due to information asymmetries and lack of publicly available data in the traditional
sense, the investment risk appears higher. However, through the nature of peer review and peer
recommendation, as well as instant feedback and the publication of all necessary project details to a large
group of potential funders, some of this risk can be mitigated.
Crowdfunding can offer unique support for budding and existing entrepreneurs on multiple levels.No other investment form, be it debt or equity, can provide the benefits of pre-sales, market research,word-of-mouth promotion, and crowd wisdom without additional cost.Donation-based crowdfunding helps not-for profit organisations to fund projects and core costs, but it canalso help to fund creative activities and common purpose activities. Both debt-based crowdfunding andpeer-to-peer funding help smooth consumption and income fluctuations, and can provide SMEs funds forbusiness expansion, production, and other activities. This is a compelling alternative to traditional lendingproducts.Reward-based crowdfunding is frequently used for creative businesses or smaller consumer products, wherebasic pre-financing for production is linked to an initial demand-test. If a sufficient number of peopleenter into a funding agreement, the entrepreneur has market validation as well as the pre-financing for hisactivities.And finally, equity-based crowdfunding offers an additional route to raise equity for any business venture,with all associated risks. Due to information asymmetries and lack of publicly available data in the traditionalsense, the investment risk appears higher. However, through the nature of peer review and peerrecommendation, as well as instant feedback and the publication of all necessary project details to a largegroup of potential funders, some of this risk can be mitigated.
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