Crowdsourcing in Finance

Crowdsourcing in Finance

It is the practice of funding a project or venture by raising monetary contributions from a large number of people performed today via Internet-mediated registries, but the concept can also be executed through mail-order subscriptions, benefit events, and other methods. Crowdsourcing in finance is a form of alternative finance, which has emerged outside of the traditional financial system. Another concept that is tightly related to crowdsourcing in finance is crowdfunding, which also taps into the power of the crowd. Crowdfunding offers a host of benefits:

-          -Access to capital hedged risk.

-          -Built-in marketing.

-          -An easier source of funding than traditional channels.

-        -  Introduction to potential loyal customers.

-          -Free or low-cost publicity and an opportunity for advance sales.

Although the sheer number of crowdfunding sites can be overwhelming, crowdfunding websites reviews and other reviews can assist by providing information on such popular crowdfunding sites as Indiegogo and Kickstarter. Criteria analyzed include ease of use, traffic, front-page exposure, payment type accepted and value.

Many of your fans, friends, and acquaintances may only be able to give small amounts, but if you can get a big enough crowd of them to donate, you can reach your funding goal. The problem is figuring out how to reach enough people without spending a lot of money on publicity and advertising.

Crowdfunding websites solve this problem by offering you a simple way to create attractive online fundraising pages that you can publicize through your email lists, Facebook pages, blogs, or any other social networks. You can also ask your friends to publicize your campaign through their networks. The more people you can ask, the more likely it is you will reach your goal.

There are several ways to seek crowdfunding. The first is the donation method of crowdfunding, where people can donate money in small increments to a project, which they believe, has moral and ethical value that is good for the community, and there is no return for money given. An example of this method is gofundme.com.

The second is the pre-order method of crowdfunding. In this method, people make online pledges during a campaign to pre-buy the product for later delivery; a great example of this method is Kickstarter.com.

The third is the reward-based method of crowdfunding. This method is a variation of the two previous methods where investors get the satisfaction of helping and immediately get a predetermined reward or item value but no equity or ownership; a good example of this method is Indiegogo.com.

Finally, the forth method of crowdfunding is equity-based crowdfunding. This is the newest method which will allow large numbers of regular people to invest small amounts each online to fund early startups with the expectation to receive dividends or investment appreciation based on profits of the business.

Crowdfunding is basically using crowds to raise capital by connecting people with talent ideas and some neat stuff to sell. Thus, creating jobs, new opportunities and fueling the economy  

References:

“Wikipedia.” Wikimedia Foundation, n.d. Web. 24 Feb. 2016.
https://en.wikipedia.org/wiki/Crowdfunding

“Crowdsourcing vs. Crowdfunding What's the Difference?” OneSpace. N.p., 22 July 2015. Web. 24 Feb. 2016.
http://www.onespace.com/blog/2015/07/crowdsourcing-vs-crowdfunding/

“What Is Crowdfunding - What Is CrowdFunding.” What Is Crowdfunding - What Is CrowdFunding. N.p., n.d. Web. 24 Feb. 2016.
http://www.whatisthecrowdfunding.com/blog/whatiscrowdfunding-22

By: Omar Almutlq