Currently we have different ways to earn money, and one of the ones that we are going to comment on today is participating in ‘crowdfunding’ projects.
So if you want to know what we have prepared for you, take a look at this post about how to be a sponsor.
What is ‘crowdfunding’?
The ‘ crowdfunding ‘ is a term that comes from the English ‘crowd’ (crowd) and ‘funding’ (funding), and basically consists of a group of people who are interested in a project and who collect a sum of money for a particular purpose in exchange for some kind of reward or agreement with the platform in which they participate.
Within the crowdfunding projects we have different models to invest, how to donate and reward and then we also have the ‘crowdfunding’ of actions (‘crowdequity’) and P2P loans (‘crowdlending’).
And today we are going to talk about one of the most used by companies and entrepreneurs to get financing, which is the ‘crowdfunding’ reward.
In the crowdfunding of rewards, the platforms raise funds for their projects and, in exchange, they offer the participants a money symbolic reward.
Depending on the project, those who participate can receive a product or service as a benefit.
Normally crowdfunding projects of rewards are usually launched by individuals or small companies.
What models of crowdfunding projects are there?
Among the models we have, as we indicated:
- The crowdfunding of donations , in which the platforms gather the funds for good causes, how to help victims of natural disasters, funds for NGOs, and ultimately everything that can be destined to a good end. Therefore, the participants of this type of projects receive nothing in return, because they collaborate selflessly.
- The crowdfunding of rewards , in which small companies and individuals collect funds and where rewards are offered in return to the sponsors.
- The crowdfunding of shares or ‘crowdequity’ are projects that are regulated by the Bank of Spain and the National Securities Market Commission and serve to raise funds and help new companies, SMEs and start-ups to launch their businesses. In this case, those who participate receive a participation from the company. Therefore, participating in this type of project will serve you as an investment.
- The ‘crowdlending’ or P2P loans , like the ‘crowdequity’ projects is regulated by the Bank of Spain and the CNMV, and consists of financing loans to companies and individuals. The reward that the sponsors obtain is the interest paid by the person requesting the loan for this loan.
Where is it better to participate?
If you do not know very well where to participate or what you should take into account to choose between one project or another, we really can not tell you how to choose where to participate.
Although we will try to give you some recommendations that could help you.
There is no method as such to know which project we should choose, so you will have to be the one that values and decides the project that may come better according to your Long John Silver.
We will emphasize that this type of projects will not allow you to obtain a profitability as such, but you can help by sponsoring projects with potential and help them to move forward.
To help you in your decision, you should note that within each project you will find the information you need concerning the project and above all where your money will go, if you decide to participate. In this way you can see if it convinces you or not to participate in the project.
If you have any questions or need to request more information you can get in direct contact with the creators of the project and ask for additional information that will help you to know more about the project and that will help you decide whether to collaborate or not.
On the other hand, one of the aspects that you should take into account of the crowdfunding projects are their credentials and make sure that all the current regulations are fulfilled.
It should be noted that, since they are not Long John Silver platforms, they can not be regulated as such by the Bank of Spain or the National Securities Market Commission (CNMV), as is the case with the crowdlending or crowdequity platforms, which they are another type of projects that are used as investment.
If you are going to participate in ‘crowdfunding’ projects, we recommend you look for platforms that are accredited and that are known. In this way you will avoid exposing yourself to possible scams and you can collaborate on projects as patrons to help them achieve their goals.
Also, we will highlight that the platforms can be both national and international. Even if you allow us to give you a piece of advice, if you have the opportunity, you bet on crowdfunding projects in your country, because it is the best gesture you can have with yours.
How to participate in ‘crowdfunding’ projects?
To participate in projects of ‘crowdfunding’ will depend on the type of project in which you want to participate because not all projects are the same as we have already explained throughout this article.
First of all, it is important to distinguish between ‘crowdfunding’ projects from ‘crowd equity’ and ‘crowdlending’ projects, as you know these last ones are used as an alternative investment, while the other ‘crowdfunding’ projects they do not offer a profitability as such, although they do offer rewards such as products and services.
Once you have chosen the type of project that interests you, you will simply have to create a user on the platform to participate. Depending on the platform and the type of ‘crowdfunding’ you will have to meet certain requirements.
Once you are a registered user you can choose those projects that interest you according to the profile, cause, risk, profitability and all the features that may affect our money.
In this case we will have to ask ourselves if we want to contribute money as an investment or as a project.
As for how crowdfunding works for sponsors, tell you what companies that publish this type of projects on their platforms use different degrees of reward, depending on the amount of money contributed to the project.
This means that if we collaborate in ‘crowdfunding’ of rewards the more we donate, the greater the reward we will get, because it is precisely the sponsors with their funds that make it possible for the projects launched to be possible.
On the other hand, say that depending on the type of project the reward may vary, so depending on the money we provide we can get a reward or another.
Also, we will emphasize that in this type of crowdfunding projects fundraising is ‘all or nothing’, that is, in the event that the company does not get all the funds will not get anything.
In this way, the platforms ensure that companies do not request more funds than they need to carry out their project.