Definition of crowdfunding:
The method of financing a project or enterprise by collecting as many minor amounts of money as possible from a wide range of private investors or donators, mostly raised via the Internet. This is a field that attracts many investors in the world in the recent years and also opened new doors for entrepreneurs and investors, both large and small.
In other words, crowdfunding empowers many people to invest very low amounts of money together in projects that could not be reached otherwise.
Initially, Kickstarter and Indiegogo were the ones to introduce this specific investment concept with unique projects that raised millions of dollars.
The main benefits of crowdfunding are:
Entrepreneurs – Relatively quick method to raise capital to fund projects under flexible and favorable conditions which are set by the fundraisers in advance.
Investors – Enjoy the opportunity to invest very small amounts in large potential projects, diversify their investment portfolio and minimize the risk while utilizing the “crowd wisdom” to assess and evaluate their investment feasibility.
Up until now, it was not possible to acquire shares in projects funded by the masses but merely purchase a specific item or benefit. Following revolutionary legislative changes in the world, it is now possible to buy shares of enterprises. Consequently, it is believed that mass-funded projects are going to dominate the financial investment field and attract deep-pocket investors to diversify their investment portfolio by holding shares of innovative enterprises.
What Investors gain in return
Product/service or benefit
Buy shares of the company/enterprise
An example of successful project
|Pebble Time – Awesome Smartwatch, pledged $20,338,986 from 78,471 backers to help bring this project to life.
Innovative Solar 34 – Solar Farms For Green Energy. Fundraised $250,000
How to make money by investing in equity crowdfunding ?
To be able to gain any potential profit from such an investment, you have to start examining different enterprises. As any other investment, it is highly suggested to carefully assess and pick the projects you wish to invest in. This kind of investment is completely passive.
Like any investment, there is always a risk that the project will not succeed. Given that the amounts invested are pretty low, the investment can be dispersed in various amounts of projects. Our aim is that most or all of our investments will succeed, however, to be satisfied with a decent ROI, it is enough that only ONE of them will significantly succeed.
How to find equity crowdfunding investments:
- Use crowdfunder site to explore and assess different investment options.
Some of the projects there are found in a middle point where they have already raised a substantial amount of money from family members, the founders themselves and other private investors, so it confers a bit more confidence to believe in such projects.
- Focus your investment on specific fields which mostly appeal to you and meet your personal interests. Do so while considering each project potential to grow and succeed big time.
- Read thoroughly the ENTIRE description presented on the project page. In addition search for any piece of information about the project online. It is not enough to make a decision only by watching the video attached to the project.
- Do ASK any question you may have. Do not hesitate to contact the project founders directly and ask your questions, until you are 100% clear with the concept and believe in it.
- Participate in investors meetings. Prepare in advance a document of questions.
- Invest amounts that you can afford to loose completely.
- Diversify your investments. Do not invest your entire amount on one enterprise.
- Think positive and good luck!
Feel free to share any experience you have with crowdfunding, or ask any question.