As bottom lines go, this one is quite literal. One of the many perks of these startups, is that they’re all established on an essential directory. There’s very little marketing involved. These companies get to focus on their products and services, and appeal to both amateur, and veteran investors all across the world.

Crowdfunding: The New Business Model

We’re all familiar with websites like Kickstarter; those without the official credentials or educational background, who wish to innovate the world, have been given a place to gain funding for their projects. We’ve seen some epic gadgets on there ourselves, including  , and they’re all worthy of getting in on the ground floor. It’s like a virtual episode of Shark Tank, except nobody’s stabbing you with questions. But there is the big question: is crowdfunding becoming the new business model?

 

Yes, absolutely. It’s not only an accelerated way to accumulate funds without having to attend various presentations, but it’s beneficial for the investors, as well. There are two main business models for the “Crowdfunder” that’s hoping to launch their product or service.

 

Reward System

These end up looking more like a GoFundMe campaign than anything else. These are the systems that popular subscription-based service websites, such as Patreon, are formed off of. While Patreon works more in art, music, and other entertainment, Crowd funders are giving away products in different tiers.

 

You may see something along the lines of “For the $5.00 submission, you’ll receive your name on our website.” Then things get super intense, when you spend $10.00 for a bumper sticker. These reward systems climb all the way up to early releases for whatever the items are, merchandise, and sometimes, even more. However, there’s a much more lucrative way to invest in a Crowdfunder startup.

 

Equity System

 Here’s where we’re talking about money. Investments. Returns. This is where traditional investment models meet the 21st century with a roaring boom. You’re investing your money in these startups with the understanding that your equity will grow with the company. Those without the means to tackle the corporate side of their company, but possess immeasurable talents, will be more willing to give up equity than products.

 

This comes with a whole mess of tax information, agreements, terms, usage agreements, and some contractual obligations. It’s the main reason that sites like Kickstarter began, to help Crowdfunders with business licenses, and bulletproof information about these business startups to ensure that investors are free from legal liability should something unfavorable hit the fan.

 

Bottom Line

As bottom lines go, this one is quite literal. One of the many perks of these startups, is that they’re all established on an essential directory. There’s very little marketing involved. These companies get to focus on their products and services, and appeal to both amateur, and veteran investors all across the world.