Attracting Investors with Crypto Сrowdfunding
With the growing popularity of cryptocurrency, there is an increased interest in investing in it through an ICO. In this article, we will look at what cryptocurrency crowdfunding is and its features.
Perfect Way to Attract Investments: Crowdfunding with Cryptocurrency
Crowdfunding became popular back in the 2000s. Instead of asking investors or seeking grants, many new projects would let people support them by asking for funding. Simply put, they would back up their business with the help of the masses willing to support it. Plenty of platforms, such as Kickstarter, appeared on the internet to make crowdfunding easy.
Another giant leap in crowdfunding was when many projects switched to cryptocurrencies. People who decided to invest in Bitcoin (BTC) and other cryptos were suddenly interested in multiplying their wealth by investing in BTC further, and the so-called Initial Coin Offerings (ICOs) were a perfect opportunity for that. But ICOs aren’t the only way of crypto crowdfunding out there.
Types of Crowdfunding
First of all, let’s check out the most popular types of crowdfunding nowadays.
This type is also known as equity-based crowdfunding or just equity crowdfunding. It’s the most similar to a standard type of investing, where investors receive a stake in the company through shares. It’s like buying common stocks in a stock exchange.
Based on Donations
This type of crowdfunding means raising donations for your project without having to promise anything in return. Back in the day, there were many such projects on Kickstarter, which mainly represented creative ideas that didn’t aim to make a lot of profit but just collect enough funds to get things started. The majority of donation-based crowdfunding campaigns seek less than $10,000 each.
Based on Rewards
Instead of promising a financial return to investors, many startups and new projects promise rewards. For example, if an investor gives $100, they will receive a copy of the product once it’s finished. Those who contribute much more will get better rewards. This is one of the common ways that ICOs collect funds.
Loans Between Individuals
Many startups often just take loans from investors with a promise that they’ll return the debt. To make a peer-to-peer loan, you’ll have to open an account on a lending platform that supports this type of investment. Once you make a loan, you’ll probably have to return it on a monthly basis.
This is a very specific type of crowdfunding where investors join their funds to buy a property or make a loan for developing a property.
Human Capital Fundraising
Human capital means everything except money, such as skills or knowledge of the employees, and the value they bear to an organisation. Sometimes, instead of fundraising money, many new projects opt to fundraise human capital.
Attracting Investments in Cryptocurrency
There are several rules that are commonly followed by crypto-based startups to attract new investors.
- Burning coins. Many new projects promise to burn unused coins in order to regulate the supply and maintain the price of their token, which could be appealing to crypto investors.
- Paying dividends. Similar to traditional markets, some crypto projects promise to pay dividends in tokens to those who buy their crypto during the ICO.
- Airdrop. Airdrop is basically a free supply of tokens given to those who apply for it. This is a great way to spread awareness about your project and attract crypto investors.
Why Do Crowdfunding Platforms Use Cryptocurrency?
The problem with fiat money is that it’s not global. If you want to invest in fiat, you’ll have to seek investment opportunities in your country or your economic zone. However, such an issue doesn’t exist with cryptocurrencies, which work on a global level. Therefore, if you want to invest in any crypto project around the world, you’re free to do it.
Moreover, anyone can be a crypto investor, as the entire process is much easier compared to the standard procedure. It’s also possible to invest a much smaller amount – you don’t need to have a big starting capital right from the start.
The two reasons mentioned above made crypto crowdfunding popular worldwide. It started in the USA and China, but it’s now pretty big in CIS countries as well, such as Ukraine and Russia.
Other reasons why cryptocurrencies became a big method of investing are:
- Crypto transactions are fast, and the entire investing process takes very little time.
- Small commission. The actual fees you’re required to pay when investing are much smaller compared to traditional commissions.
- Thanks to blockchain and other underlying technologies, investing with cryptos is a very secure process.
Platforms That Accept Cryptocurrencies
There are a couple of popular crowdfunding cryptocurrencies that already accept crypto. Let’s take a look at them.
Fundsurfer is headquartered in the UK and offers an array of fundraising services for online and offline crowdfunding. It also provides useful crypto crowdfunding tools.
Tecra aims to bring together young investors with young visionaries. It also features a Tecra blockchain and Tecra coin, which is part of its ecosystem.
RealityBits allows its users to purchase fractional ownership of real assets. This is a hybrid platform, meaning it’s both cloud-based and blockchain-based.
Kickstarter is one of the oldest crowdfunding platforms of its kind. It focuses on creative projects, such as music, art, design and more. Therefore, artists can fund their ideas using Kickstarter.
To sum up, crowdfunding has never been more popular, as cryptocurrencies made it possible around the world. Therefore, if you’re working on a project that needs to be financed, crowdfunding with crypto might be something to take into account.