Until relatively recently, any entrepreneur or person who wanted to take a personal or business project forward, and did not have the money to do so, opted for a few possibilities: ask for a grant , a loan to a bank or help your relatives and friends. However, the arrival of the Internet has opened the possibility to new alternatives such as crowdfunding. Do you know what it is?
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The crowdfunding, is a network of collective financing, usually online, that through financial donations or other, manage to finance a project in exchange for rewards, shares altruistically.
The projects for which crowdfunding is used as a source of funding can be very varied: from musical or artistic projects (getting money for a film or a short film) to political campaigns, financing debts, creating schools or starting businesses, among others.
Origins of crowdfunding
Regarding the origin of crowdfunding, we can find it in donations. The first crowdfunding action is officially attributed to the British rock group Marillon, made in 1997 in order to finance its US tour. However, in Spain, there was a very similar event almost a decade earlier. The one of the musical group Extremoduro, that in 1989 financed its first disc thanks to donations of other people.
Open Source projects by developers are among the first expressions of crowdfunding.
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Currently, depending on the type of reward that participants receive in exchange for their participation in the project, there are five models of crowdfunding:
· Donations: Those who make contributions do not expect benefits in return
· Rewards: Those who make contributions will receive a reward for their contribution.
· Of actions: Those who receive shares of it.
· Loans or crowdlending: This is a mass financing, through loans from a company in exchange for an interest rate for the money borrowed.
· Of royalties: When it is invested in a certain project or company and it is hoped to obtain a part, even symbolic, of the benefits.
How does crowdfunding work?
The operation of crowdfunding depends on the type of crowdfunding that we have selected as a form of financing. However, these are the main phases:
· The entrepreneur sends his project, or his idea of a business, to a crowdfunding platform, which is usually online, to be a candidate for financing. So that your project can be valued, it indicates: a description of it, how much you need, how much time you have to collect what you need, type of crowdfunding to choose from, etc.
· Evaluation of the project: the community or the platform itself values the interest of the project.
· The project is published on the platform for the time indicated in the application. It is the period of time that people have to invest.
· During the time that is public, is promoted to the maximum to get financing.
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Do you think that crowdfunding is an equal and democratic opportunity for all kinds of people to fulfill their dreams of creating projects or companies? Do you consider that it is realistic and that it will be able to settle in the Spanish market as a viable alternative to traditional banks? Comment with a comment!
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