Crowdfunding

and alternative
sources of
financing
Dr. Farheen Akram
 What is Crowdfunding
“Crowdfunding is the practice of funding a project or venture
by raising monetary contributions from a large number of people,
typically via the Internet.” One financial expert describes it as
“large groups of people combining their economic power to
support an organization, company or project they believe in.”

The practice of funding a project or venture by raising many small

amounts of money from a large number of people, typically via
the Internet.”
 REASONS TO
CROWDFUND

• Generate start-up capital without reducing equity

• Validate your concept in a public forum
• Reach a global audience on a trusted platform
 How crowdfunding work
Through crowdfunding, individuals are able to invest in entrepreneurial start-ups
through an intermediary, such as a broker-dealer or a “funding portal.”

By law, “funding portals” are not allowed to provide investment advice.

A funding portal is a website, also called a “platform,” that advertises the investment
opportunities and facilitates the payment from the investor to the issuer.

Some portals advertise a variety of investment opportunities on one website, allowing

the investor to select one or more projects in which to invest.
Choosing a Platform

 Has the widest audience  Somewhat well known  Lowest fees on this list
 “All or nothing” funding  “Any collected” funding  Flexible funding options
 Intended for entrepreneurs  Intended for entrepreneurs  Intended for causes
Crowdfunding
Models or types
• Rewards-based crowdfunding.
• Start-up equity crowdfunding.
• Debt-based crowdfunding.
• Good-cause crowdfunding.
• Pre-order crowdfunding.
Types of Funding
Reward-based crowdfunding has been used for a wide range of purposes, including motion picture
promotion, free software development, inventions development, scientific research, and civic
projects.
two types of reward-based crowdfunding were identified: –
Keep-it-All (KIA)
All-or-Nothing (AON)
Start-Up Equity Crowdfunding This new model allows large numbers of “regular” people to invest
small amounts online to fund early start-ups.
Debt-Based Crowdfunding : Sometimes called micro-financing or peer-to- peer (P2P) lending: – start-
ups borrow money from a number of people online and pay them back after the project is finished.
 Types of Funding

Good-Cause Crowdfunding: People invest

(donate) money to a project that has good
moral/ethical value. Most companies using
this model are not-for-profits.
Pre-Order Crowdfunding: Investors make
online pledges to pre-buy the product for later
delivery (if it is ever built). No financial return
should be expected other than the product.