Crowdfunding is the process of funding small businesses or startups in their early stages. It is done by grouping a large number of people who are jointly interested in investing in new projects or ventures. In 2015, US$34 billion was invested globally through crowdfunding. It is just the same as alternative finance. This process has helped a lot of struggling startups having great ideas, who find it challenging to raise funds. The method of funding new startups motivates and encourages youngsters to change their careers to entrepreneurship. These emerging entrepreneurs can play a vital role in shaping a better future for the world.
Crowdfunding is an internet-based process. In order to enjoy the services of fundraising, you need to register in some crowdfunding sites. The modern crowdfunding model includes three types of character: the person who initiates an idea and presents it before the investors to raise funds for that idea, the person who likes the idea and is interested in investing in it and the organization that brings these two parties together.
Crowdfunding has raised funds for different ventures and projects all over the world since it had been launched. Crowdfunding has raised money for various entrepreneurial ventures such as art projects, health projects, travel projects, projects with new techs, and projects that can solve existing global problems. It has also helped with many socially-oriented projects.
In crowdfunding, each investor has to contribute a small amount of money that can amount to $1000 or sometimes less.
There are different sites present that provides crowdfunding services:-
AngelList : Crowdfunding
Angelist, founded in 2010, is a well-known crowdfunding site. It is one of the oldest and preferred crowdfunding platforms. It was established to create connections between financially struggling entrepreneurs and investors who are looking to invest in new startups, generally known as angel investors. In these sites, the investors are experienced. Also, some of them have earned their money by selling their startups.
In this platform you can invest money in three different ways:
Deal-By-Deal investment –
In this type of investment, you need to join a group having the same interests as you, generally known as syndicates. Well-known lead investors head these groups. These syndicates may contain dozens or hundreds of investors interested in making six-figure investments, which can range between $200,000 to $350,000 per deal. Experts suggest diversifying your investments if you are investing through syndicates for lower risk and more return.
AngelList Access Fund-
In these types of investments, you don’t need to analyze the companies you are interested in because AngelList has done this part for you by vetting the companies registered in this platform. The minimum investment amount is $100,000.
In these types of investments, the investor gets his own AngelList representative to help him. The investors get to connect with the top management of the company; this is a rare feature only provided in this type of investment. The minimum investment amount is $500,000.
AngelList also provides a recruitment platform for job seekers in order to help them in the job finding process. Many healthcare professionals, engineers, software developers, management students, etc. are searching for a job to fit their career, this can be achieved by using these services of AngelList.
CircleUp : Crowdfunding
CircleUp connects the investors to those startups which deal with consumers directly. The startups are involved in sectors like food, fitness, beverage, fashion, electronics, technology, etc. The companies that are registered in this platform must have a revenue of $1 million. Companies require a genuine product and an outlet to get them registered on this platform. CircleUp receives almost billions of ideas, but it evaluates them to keep only the favorable ones.
CircleUp contains company profiles that give information about the company’s products, management, hierarchy, goal, business model, supply partners, retail partners, income, and more.
CircleUp contains a unique feature known as the DealFlow feature in which registered investors can watch the companies raising funds, investment processes followed by the companies, and they can also demand a product sample from the company. An investment didn’t close until the company has raised the total investment target.
CircleUp contains two ways to invest in platforms: Direct Company Investments and Circles.
Fundable : Crowdfunding
Fundable is an established crowdfunding site and provides the benefits of reward-based crowdfunding as well as equity crowdfunding. Companies that are interested in equity crowdfunding, fundable provides them advisory benefits by helping them with profile building, preparing their pitch to present it before the investors, and also analyzes there business plan and make developments in it.
Fundable is operating now with the support of TheStartups.co, a company that works on software, hardware, and consumer product startups.
Company profiles are available to everyone in Fundable. Investors can request a prospectus and make a funding pledge in this platform before carrying out the process legally. Fundable does not include direct investments; you need to connect with the company raising funds and transfer all money and shares outside the platform.
CrowdFunder is a well-known crowdfunding site. Although it doesn’t have any restrictions on the registration process, the listed companies in this platform are mostly innovative and deal with some unique problems of the society, for example, companies who are trying to make use of alternative sources of energy to reduce pollution.
Company profiles in this platform contain detailed information about the company. The information includes sales data, case studies on how the companies deal with their problems, the company’s future goals, analysis report on the company’s future ideas, and also the detailed profile of the leaders. These profiles are accessible to the public, including non-registered users. Registered users have the option to demand the full prospectus and the financial statement of the company.
In CrowdFunder also, the investors only make non-legal pledges in the platform, but the actual transfer of funds takes place outside the platform.
EquityNet : Crowdfunding
EquityNet was founded in 2005 and claimed to be the original equity crowdfunding site having the patent for this concept. It mainly focuses on enterprises dealing directly with the consumers and enterprises, those who are on the verge of solving social problems just like CrowdFunder. EquityNet also attracts projects having single assets opposing the multi-asset projects.
EquityNet, just like CrowdFunder, gives access to the detailed portfolio of the companies to the public and gives full prospectus and financial statements access to those who have registered on the platform.
EquityNet has never mentioned any minimum investment value in their site, but it is always hard to find investments less than $1000.
WeFunder’s co-founders had participated in the JOBS act debate and had claimed some credit for the crowdfunding friendly measures; these claims had made it to the final legislation. Most of the competitors in the crowdfunding market have a compulsory minimum investment of $1000, but in WeFunder, you can invest as low as $100 in different companies.
WeFunder gives a detailed overview of the companies that are raising funds. The information includes sales charts, business plans, and company’s top official interviews and a ‘why I like these company” section. They also provide a question and answer platform for the investors to ask their doubts regarding a particular company to the company’s top officials; these features are only for the registered users.
Localstake : Crowdfunding
Localstake connects investors with small businesses that are interested in generating revenue. Localstake crowdfunding platform list companies that are consumer-facing, such as apparel manufacturing, food production, and beverages. This platform accepts a minimum investment of $250. Localstake offers four types of investments: Revenue Share Loans, Convertible Debt, Preferred Equity, and Traditional loans.
SeedInvest is a crowdfunding platform that lists the companies after properly analyzing their overall performance and future plans. The platform claims to accept only 1% of the companies who have applied to get registered.
In this platform, a company’s profile is invisible to the public, but registered users get access to the company’s full prospectus and financial reports. The majority of the companies listed on this platform are tech startups. Investors can invest directly through this platform.
EarlyShares : Crowdfunding
EarlyShares lists real estate enterprises that are interested in raising funds. These enterprises are generally multi-asset organizations. Due to the involvement of high valued assets, the minimum investment value ranges between $5,000 to $25,000. Investors make legal as well as non-legal pledges in this platform.
PeerRealty also lists real estate companies. Projects such as completed buildings, planned or under construction buildings are listed on this platform. This platform allows a minimum investment of $5000. PeerRealty is the only platform that provides second exchange facilities, and investors can resell there owned shares to other investors in this platform.
In spite of this list, there are many other crowdfunding sites that are also performing well in the market. These sites provide an excellent opportunity for different startups to raise funds as well as angel investors globally. The problems a startup faces in the early stages are solved by these sites.