As we enter the age of the internet, we become less of an individual and more so a community. This can be applied to business models as well as communication methods – no longer do businesses have to rely on the financial power of a founder. With access to the internet, starting a business has become ever more accessible to anyone with an idea.
How is this financial base of a startup achieved if the one with the idea doesn’t have the money to back their project? Many people have turned to methods such as personal loans or crowdfunding to back their business. If you don’t have the wealth to start a company from the ground up, you’re not alone. Turning to crowdfund is the newest and most effective method to back your business.
Community Funding for Your Startup.
What is crowdfunding?
This is the method that many entrepreneurs employ to provide backing to their business. It implements the idea that we’re in this together and if I believe in your idea, I’ll back it financially. This can be done by one powerful and wealthy person, or it can be achieved by receiving smaller amounts of money from a larger community of people.
The basic idea is that you, the business owner, present your business or product idea to someone. This person then decides if they believe in the success of this product and whether or not they invest. Once they invest a sum of money, they take a stake in how the business succeeds or fails down the road. Crowdfunding allows inventors or entrepreneurs to receive backing for any ideas for products or business models they wish to start on.
Benefits of crowdfunding.
The benefits of crowdfunding are plentiful and advantageous for everyone involved. The crowd places money in an idea they believe in and allow the idea to grow into more. The CrowdFunder receives the financial backing that allows their idea to become more than simply an idea.
Investment opportunities – As the one investing the money into an idea, you have the opportunity to support any product or business model you choose. The buy-in amount can vary based on the foundation, but some might allow as low as a $10 backing – you’re then tied into the success of the idea you’ve backed.
Tax incentives – By investing in a crowdfunding opportunity, both you and the business owner will have decent tax breaks. Much of the legislation surrounding crowdfunding is still in the works, providing a gray area for taxation purposes. This money received from crowdfunding tends to receive looser taxation or none at all based on the purpose of the financial backing.
Diverse portfolio – This is a great benefit for the investor – having a diverse portfolio allows you more breathing space financially. If you place all of your eggs in one basket, your chances are higher of a financial loss. By spreading your wealth around, you both lower your risk of loss, as well as raise your chances of gain.
Crowdfunding is a fantastic financial opportunity for both the investor as well as the business owner. Crowdfunding has allowed anyone to start the business of their dreams as well as invest and back the ideas that will change the future.