How crowdfunding works

There are many projects that need capital that the person who has the idea can not contribute, and it is not viable in many cases to request a loan. For this, there is always the possibility of asking for donations or seeking collective financing among all those people who are interested in materializing the idea. And this is what crowdfunding deals with , whose operation we will explain in this article from .com

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What is crowdfunding

Crowdfunding is a novel system of collective financing, in which the participation or donation of all those who wish to participate in a project that someone has created is sought, finding in this way the necessary financing to be able to carry it out.

As compensation for taking part in the financing, the participants usually receive something related to the project itself, such as promoting them for having financed them, gifts of products and services or any other type of compensation related to the project itself.

Usually these compensations are received, although in the idea of ​​crowdfunding, they are dispensed with.

One of the most characteristic uses of this financing is for the creation of small business projects and to finance artists and musicians who are just beginning their career.

Steps in crowdfunding

There are several phases that must be carried out to obtain funding in the crowdfunding model :

  • In some of the existing crowdfunding platforms, the project is published, determining what it consists of, the amount of money needed and how it will be rewarded in the event of a reward.
  • There is a certain time to obtain this financing, in which we will have to commission the publicity of the project among possible stakeholders and promoters, social networks, our circle of acquaintances, etc., in order to get the money and to let people know about it.
  • Once the time has finished, depending on the type of project and financing that we chose previously, if we obtain all the necessary money, we will receive it to start our activity. If we do not reach 100% but the cooperators agree and it is viable, we can take it forward, otherwise, all the money will be returned.