There are two distinct markets for crowdfunding: those looking for finance and those with money to invest.
For those needing finance crowdfunding provides an opportunity for them to reach a wide audience with their message and their request. It allows them the chance to engage with new finance sources they would otherwise never have known about. The process is centralised and efficient making it easier to raise large sums.
Broadly speaking there are three categories of those who can use crowdfunding for their venture:
- Those looking to raise equity: they can use a
crowdfunding platform to pitch their idea/business and raise money for
start-ups or established businesses by selling shares in the company
- Those looking to raise debt finance: this is
more focussed on the hard financials of the company and usually also based on
historical performance rather than future projections. For this reason this
option is realistically only open to established businesses (minimum 2 years' trading history)
- Those looking for philanthropic support: these
requests can be anything from artistic projects, new product development or even
charitable donations. They allow people support projects they like without a
clear financial reward
For those with money to invest, the same benefits of the process being centralised and efficient also apply. Crowdfunding presents them with a wide choice of options for their money across all the above fields.
A final point to note is that this market is evolving and the range of people who should use crowdfunding is growing all the time.
