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Crowdfunding platforms – what to consider?

Crowdfunding has become so popular, that the total crowdfunded investment volume worldwide rose to 34 billion dollars in 2015. As of today, Crowdestate has helped to raise over 50.4 mil euro. Due to the increasing demand for projects, new crowdfunding platforms are being established regularly and an investor might have difficulties in finding the most suitable platforms. In this blog, we have written a short overview of the differences between crowdfunding platforms and what an investor should consider before making an investment.


The types of crowdfunding platforms

In general, two types of platforms exist – for charity and for investment purposes. But a more precise way would be to differentiate them by their objective:

  • Many platforms have projects that offer a „reward“ for your investment, i.e a product in development that you can receive before it hits the market. The most famous platform of this group is Kickstarter
  • Equity crowdfunding is the collective effort of individuals to support efforts initiated by other people or organizations through the provision of finance in the form of equity. Investors shall take part in the development of the company and its potential future profits. However, the investment term and yield can be rather unpredictable. Crowdcube and Seedrs are platforms that facilitate equity crowdfunding
  • Debt-based crowdfunding (also known as “peer to peer”, “P2P”, “marketplace lending”, or “crowdlending”) enable investors to invest into short- or long-term loans to private persons or companies. In this case, it is important to emphasize that an investor should find out what/who it is they are investing in and assess the potential risk level of the investment. Person to person loans are offered by Zopa or Lending club while companies can find funding through Investly or Crowdestate crowdfunding platforms
  • People with good intentions have a chance to donate their money via a charity platform. There are many of these platforms and one can donate to help cover the costs of health care, legal fees or education. But there are many fun examples as well, like the project where a person asked for donations to make potato salad

Check out Lending Times, which is an info portal that publishes crowdfunding news and monthly crowdfunding volumes.



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