CrowdFunding On The Rise

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Banks Obsolete as Cloud Generation Turns to Crowdfunding?

There are dreamers, and then there are Dreamers. The latter are the people who have led humanity on its relentless course of progress, of myths, and jokes, and fairy-tales being brought to life. These are the people who built the first airplanes, and the ones who will someday build time-machines or transporters. Dreamers are the people who know exactly what life offers them, and are ready to go out there and take it.

Which isn’t that small a detail, if you think about it? But the wonders of the 21st century are numerous, and that includes many heretofore unseen internet phenomena, from political movements, instant internet banking, online shopping, and the point of this discussion, a new way of raising monetary contributions for a project; crowdfunding.

Crowdfunding is an interesting way to raise money, because it takes advantage of the internet’s seemingly omniscient reach. News posted on the internet can reach more people than television and print-media combined, because of the way individuals can use social media to propagate something by ‘sharing’ or ‘tweeting’ until millions of people have seen it.

So how does crowdfunding work? There are three main parties involved in the process, resulting in a mutually beneficial transaction. The first is the ‘project initiator’, the Dreamers with a plan, but without the financial backing required to carry out their project. The second group consists of people around the world who are interested in funding the project, for any number of reasons. The benefit of having so many people involved, is that even if each person makes a small, reasonable donation, it adds up to a pretty large amount. The third is a moderating organization or ‘platform’ that manages to connect the project initiators to their supporters, and gain them the required monetary support.

So why would people agree to fund a random project someone else dreamed up? Well there are numerous reasons, but the major ones are simple. The project could be one that supporters would really like to see exist in the real world. Movies, video and computer games, often use this method, and the ‘benefit’ that people get out of it is a copy of the movie, or game after it has been developed. This has been termed ‘reward-based crowdfunding’ and requires a somewhat emotional attachment between the supporter and the project involved. Clearly one wouldn’t support a movie adaptation of a 1930s science fiction novel if you’ve never read it, or support the building of a community centre or library in a city you don’t live in, and won’t require membership to.

Another method is ‘equity-based’ crowdfunding, and this one doesn’t need an emotional attachment. Instead, the supporter gets equities in the company or start-up that is being developed. This is a money-only transaction, but may end up better for both parties, especially when compared to traditional banking interest rates. ‘Credit-based’ transactions are also a better alternative to banking, and are set up by non-banking platforms that match up people who want to borrow money with people willing to lend them that amount of money on their unique set of terms.

Crowdfunding’s not a new idea anymore, more than a decade old; it’s actually in the adolescent stage now. People around the world have proven its uses, and made amazing transactions, but the future definitely holds infinitely more possibilities for crowdfunding.

 

 

 

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