How To Use Crowdfunding To Raise Money

How To Use Crowdfunding To Raise Money

Crowdfunding campaigns can be very beneficial when acquiring money for personal or business purposes. Let’s say you come up with a spectacular new idea for a product or service. Even if your idea is great, you may also need funding to make it a reality. In most cases, these funds will be used to create a physical product or start-up service. If you are offering your services, you may not need funding unless you have the tools you need to purchase. Even if tools aren’t necessary during your start-up, you will need advertising and marketing money.

crowdfunding close-up photo of assorted coins
Photo by Josh Appel

There are numerous ways you can raise money for your business idea. This can involve obtaining assistance from close friends and family, holding a yard sale, organizing a fundraiser, taking out a loan, or setting aside money until you are ready. Speaking of fundraising, one way to raise money for your company is through crowdfunding. One way you can raise money for a person or organization through crowdfunding is to ask for donations from family, friends, friends of friends, strangers, businesses, and other sources. People can reach more potential donors through social media than through more standard methods of fundraising.

The Crowdfunding Foundation

Three things serve as the foundation for the modern model of crowdfunding. The first begins with the person who started the project, or the “creator.” This is the individual who comes up with the funding-related idea or project proposal. The second part of the process is based on particular people or organizations that are prepared to support the project or idea. The moderating organization also referred to as the “platform,” is the final element. It brings the parties together to introduce the idea.

This method of raising funds gives you the opportunity to get support from a crowd, which is typically a group of individuals who collectively invest in your idea to make it a reality. Crowdfunding is a business funding strategy that focuses on raising smaller amounts of money from a larger collective of individuals, usually via the internet. Before you start crowdfunding, find the best platform for your needs. According to one account, there are five types of crowdfunding models.


Donation Based

One of the most widely used forms of crowdfunding is this. Raising money for a cause that people care about and are interested in, can be a fundraising strategy. It may also be a way for you to raise money for your own needs, a great idea, or a new venture. Crowdfunding can be done by using social media networks or by creating an account on a social networking website. This may be a fantastic strategy for raising awareness and promoting more donations.

Debt crowdfunding Campaigns

Debt crowdfunding, also referred to as peer-to-peer lending or crowdlending, is a quick and simple way for people and companies to raise the money they need when they require it. Debt crowdfunding raises money by soliciting donations with the promise to recoup the funds later. Businesses that need capital and would rather repay the money than distribute equity typically use debt crowdfunding. People also used debt crowdfunding to pay off loans and other financial obligations when they needed cash. When running a debt campaign, be sure to make it clear why the funds are needed and when donors can expect their contributions to be repaid.


Equity crowdfunding is also referred to as “crowd-investing,” “investment crowdfunding,” and “crowd equity.” It is best suited for small- to medium-sized businesses that need a significant amount of funding to start or expand their operations. Donors receive a portion of the company’s ownership in return for their contributions. This percentage can be a great way for businesses to quickly raise capital without the hassle of a conventional business loan. It varies depending on the business. Equity fundraising typically has high fundraising minimums, often in the tens of thousands of dollars.



Another popular form of fundraising is rewards-based. This method is typically used to raise money for a brand-new business or organization that provides goods or services. Donors can receive rewards based on the amount they contribute with rewards-based crowdfunding. Handmade items, gifts donated by business partners, or complimentary goods or services provided by the fundraiser’s organizer are typical rewards.

Real Estate Based

Real estate crowdfunding is one of the more popular recent models of crowdsourcing. It is best for investors who want to invest in real estate. All without the hassle of obtaining a conventional loan or the requirement of owning the entirety of a single property. Let’s say a large property, such as an apartment complex, is purchased. This is typically done with funds raised from investors by an individual or a real estate business. Investors can contribute much smaller sums of money through real estate crowdfunding, typically starting at $5,000, depending on how much of the property they would like to own. Depending on the amount of revenue the property brings in, investors will then receive payments every quarter.

Types of Crowdfunding For Startups: Sites & Platforms

1. Gofundme

GoFundMe is the largest crowdfunding platform. This site is widely used for personal needs such as emergency funds, accidents, and natural disasters. It can also be used to help pay medical expenses.

2. Kickstarter

Kickstarter is the most popular crowdfunding site for aspiring businesses hoping to raise capital and reach a larger audience.

3. Indiegogo

Indiegogo’s crowdfunding site initially focused exclusively on raising money for independent films but began accepting projects from any category a year after its launch in 2008.

4. Fundly

Fundly provides a fundraising website to all individuals, non-profits, schools, political organizations, and corporations who want to raise money for a cause.

5. Facebook

Facebook can be used to raise money for things like tuition, medical expenses, and community projects. You can also use this tool to raise money for non-profit organizations and charities.

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