Crowdfunding: what it is and what it is used for

Crowdfunding is a method by which you can raise funds through those who want to access the project through investment.

Each project has its investment end date and the amount to be collected. If you do not know the answers to the questions: what is crowdfunding for need? And how to get to crowdfunding? This review may be helpful for you. Also, you can try your hand at our website

Crowdfunding can be used for various purposes by both companies and individuals. Its application you can use for:

  • launching a startup;
  • charity project;
  • collection of funds for training, etc.

                           Benefits of opening a crowdfunding platform

Suppose we are talking about investing in a business or a startup. In that case, one of the advantages of crowdfunding is that by contributing their money to the project, investors can make a profit if the project becomes successful. Next, we’ll take a look at how crowdfunding works.

By investing in a business using a crowdfunding platform, you buy shares in the project. If a company is thriving, then its stock may rise in value. Thus, you can potentially increase your investment in the event of a successful business project.

Let’s give an example. You have decided to invest in a startup where one share is valued at 10 $. By taking ten shares, you give away 100 $. In the event of a positive development of events, the company can succeed. For example, after a while, the value of the shares increased 10 times due to the success of the project. In this case, 10 shares are no longer worth 100 $, but 1000 $. In other words, funding a project through crowdfunding can increase investment.

   Cons of crowdfunding sites

Among the disadvantages are investment risks. Since you are investing your money in a project, you cannot predict success. You cannot know for sure whether it will succeed or not.

The second point worth paying attention to is the rules of the site (crowdfunding platform) on which you want to display your project. Some areas strictly adhere to the “all-or-nothing” policy. It means that if you set a goal to collect 10,000 $ within a certain period and did not invest in its framework, collecting only 9,000 $, according to this policy, there is a possibility that you will not receive this amount. After all, the conditions of the collection have not been met.

It is recommended that you carefully study the rules of crowdfunding before raising money through crowdfunding.

    Types of crowdfunding

Crowdfunding can be roughly divided into two categories:

  • They are making an investment based on donations, where participants fund a new project. The main purpose of registering to crowdfund based on donations is implementing a project, product, product, or service at the expense of investors. A typical example is a charity project.
  • Investment crowdfunding. In this form of investment, companies sell their shares to investors. In this way, they become shareholders and can make a profit if the business is successful.

The types of crowdfunding are as follows:

  • Equity Crowdfunding

They are used by companies when they raise funds through the sale of a stake in their project.

  • Debt-based Crowdfunding

This type of project financing is characterized by the fact that investors receive their money with interest for some time. This structure resembles peer-to-peer lending. This type is also called “debt crowdfunding.”

  • Reward Crowdfunding

Participants of such a crowdfunding platform can receive valuable prizes or gifts for their monetary contributions.

Before opening a crowdfunding platform, you must register a legal entity and obtain the appropriate permission to conduct such activities.

Jurisdictions have their unique requirements for those looking to launch a crowdfunding platform. The most popular solutions might be:

  • registration of a crowdfunding platform in Asia;
  • registration of a crowdfunding platform in Australia;
  • registration of a crowdfunding platform in Europe;
  • registration of a crowdfunding platform in the USA.


Usually, with the help of crowdfunding, funds are collected for specific goals and projects. If you don’t know how to raise money for a startup – opening a crowdfunding platform may be the key to solving this issue. Specialists can advise you in more detail on this issue.