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Joao Aguirre PhD
Joao Aguirre PhD

What is crowdfunding?

Collective financing

Also known as microcredit, it can be understood as a collaborative network to finance a project, either by donation or other financial contribution, where the contributors receive rewards in exchange.

Joao Aguirre Strategy and innovation

By: Joao Aguirre

  • To understand it in a simple way, we could affirm that this is a source of collective financing, although it is true, this is not a new concept, but with the recent growth of virtual tools, a wide variety of platforms and business models have been developed. that contribute to the growth and development of projects, especially today for innovative and disruptive projects.

    Traditionally, if you wanted to start a project or business, you require a fairly strong capital investment, but by implementing crowdfunding initiatives, this barrier is no longer there. In short, crowdfunding allows you to finance yourself or finance a project that you consider interesting in exchange for a series of rewards.

    For example, if you want to create your own business which has an initial investment of $ 1000, you no longer have to have all the capital, if you are willing to share the risk and benefits, you could get a series of investors who could contribute to your project And what if you could finance that project with 1,000 people who contribute you $ 1 each? This would be great, because you could get to the market in an easier and faster way, on the other hand you should also take into account that depending on the percentage you share you will also have to share the profits in the same relationship.

    All those who contribute to your project generally do so thinking of receiving a reward, either in kind or financial, since there are very few cases that contribute for philanthropy.

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  • Crowdfunding solves the problem of financing, and additionally, it also manages the presale and validates the idea of the product or service.

  • The rewards are of different styles, incentives, motivations, in short, the most prominent are:

    Symbolic or Donations: These are more associated with non-profit entities, and are associated with objects that work in favour of conservation and prevention activities. Examples of these rewards are a message of thanks or appearing in the credits of the book, web, movie, etc. Philanthropic, but in some cases, it may be unusual for your brand or name to appear in some activity with a social impact.

    Product (product packs): This type of rewards is widespread, which includes a product of the project that you support, this type of awards should always add value, avoid adding a lot of merchandise that is not related to your project. It is possible to include part of the product that you develop, for example, if you do crowdfunding to improve a new travel suitcase, a good incentive would be that the people who contribute receive one of them.

    Services: these rewards are intangible, in projects such as causes, or entrepreneurial projects, you can offer compensation such as the participation of a workshop, or an online course, a diagnosis, a review, access to an app, software, etc.

    Experiences: These are usually exclusive rewards for those involved and include experiences with the creative team such as a Skype, dinner with the team, a visit to the factory, etc.

    Participation: these types of rewards have significant growth since the creator of the project can obtain financing in exchange for a percentage of his company or project. This type of compensation requires more follow-up but has great benefits with new companies that may have rapid growth, or maybe you can also find companies that never manage to be sustainable.

  • You must be the most original in these rewards!

Another critical aspect of any crowdfunding campaign is to be completely honest and sincere to potential investors. If we want them to trust us, we must give as much information as possible about both the project and the creators.

It is essential to understand that many projects require financing. Still, on the other hand, if you are a person who is willing to invest in innovative projects diversifying your risk, this is a great alternative.

Crowdfunding platforms

The platforms have a double responsibility; on the one hand, it offers a technological solution to the creators. In other words, the creator can go to the web, register, enter their data, the data of their project, their campaign, the rewards, etc. And then just limit yourself to spread the campaign to the maximum on social networks or your network of contacts. The platform is in charge of all the technical details, of carrying out the transactions, charging the patrons and paying the creator.

Besides, they also have a dissemination role, as all these platforms have a certain number of essential visits, from people interested in knowing what projects are available to be financed.

The platforms usually charge 5% to 10% as a percentage of the total collection.

Each platform has its characteristics, its strengths and its weaknesses. Some platforms do not allow you to invest unless you are a citizen of the country of origin due to currency exchange or return of profits, on other platforms. This is more accessible; it depends on where you want to invest.

Below we will list some platforms that may interest you:

The innovation factor and the create something new factor are important in crowdfunding.

For now that’s all!. Remember that if you want help in topics such as innovation or strategy, I am Ph.D. (doctor) in strategy and innovation and a consultant with extensive experience in developing strategies to boost the growth of your company.

Do not hesitate to contact me, I will answer you as soon as possible, or if you want to hire my services as a lecturer or consultant, write to me.

Greetings and until the next article or video!

Joao Aguirre, Ph.D

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