Donation-Based Crowdfunding
Definition of Donation-Based Crowdfunding
Donation-based crowdfunding is a method for obtaining money for a project by requesting a large number from supporters of exclusively give a small amount to it. In return, the supporters might receive token rewards that increase in esteem as the size of the donation increases. For the smallest sums, nonetheless, the funder may not receive anything by any stretch of the imagination.
In some cases alluded to as rewards crowdfunding, the tokens for donations might incorporate pre-deals of a thing to be delivered with the funds raised. Donation-based crowdfunding can likewise be utilized with an end goal to raise funds for charitable causes.
Since this kind of crowdfunding is predicated on donations, funders acquire no ownership or rights to the project — nor do they become creditors to the project.
How Donation-Based Crowdfunding Works
In the event that an entrepreneur or designer has a great thought for another product or service, crowdfunding offers an alternative method for fund-raising, rather than traditional methods of borrowing money through banks or private loans or by offering equity shares. Through donation-based crowdfunding, the entrepreneur can pre-offer their product to a large number of supporters who each give a somewhat small sum toward the project. To empower higher donation amounts, the entrepreneur may likewise offer token rewards of expanding value or significance, while holding full ownership of the project or company being funded.
Instances of donation-based crowdfunding platforms incorporate Kickstarter, Indiegogo, CrowdFunder, and RocketHub. Donation-based crowdfunding platforms pointed toward fundraising for charitable causes incorporate GoFundMe, YouCaring.com, GiveForward, and FirstGiving. Regularly, these services take a 5%-10% fee, everything being equal.
Various Uses for Crowdfunding
Noble cause could look to crowdfunding as a means to gather support for relief efforts or causes the organization is advocating. For instance, disaster relief noble cause might look for funds to aid in the hunt, salvage, recovery, and treatment of people impacted by decimating tempests or seismic tremors. There might be lobbies for specific necessities like funding the vehicle of food and dress to the disaster area. The donations might be looked to support the construction of brief safe houses or the procurement of medical supplies. Crowdfunding could likewise be utilized to pay for the reconstruction of infrastructure and utilities that wouldn't in any case be covered by government disaster funds.
At its root, donation-based crowdfunding should be visible as comparable to microfinancing. The requirements of getting money are not so rigid as utilizing a financial institution and the amount of funding being looked for might be smaller than the base loan or credit amount that is accessible from a bank or traditional investors. It isn't unfathomable, in any case, for the last amount raised through such a platform to far surpass the initial goal that was looked for. There have likewise been examples of large crowdfunded crusades that never delivered on the guaranteed tokens or products.
Features
- Donation levels can be set with associated advantages or rewards.
- Donation-based crowdfunding is an approach to fund-raising by requesting a large group from individuals to give.
- Donation-based crowdfunding is unique in relation to loans or equity, in that there is no guarantee to repay or ownership stake.
