What is Crowdfunding?
Crowdfunding is a way of raising money by asking a large number of people (the crowd) for a small amount of money from each of them. Traditionally, funding a small business, new idea or venture involved asking a few people for large sums of money. Crowdfunding switches this idea around, using the internet to talk to hundreds – if not thousands – of potential supporters.
Our platform allows those seeking funds to set up a profile of their idea and then using social media links, together with traditional marketing to networks of friends, family and work acquaintances, they can raise money in a secured environment.
Our platform also allows the community to finance new ideas, provide support to regional projects and even help fund our regional sporting representative. By focussing on regional opportunities, we allow contributors to give something back to the community that has supported them and ensure that money raised locally can stay locally providing much needed employment opportunities and local business entrepreneurs to flourish.
Interestingly the first online crowdfunded project is thought to have occurred in 1997. Rock band Marillion were unable to afford to tour after the studio costs necessary to release of their seventh album. Disappointed with the news their American fans used the internet to raise $60,000 so they could book venues and play across the US. The band have since used the same techniques to successfully fund the production of their following three albums. Since then, this marketplace has grown substantially.
Below is a brief description of each of the different type of crowdfunding.
Donation / Reward / Vote Crowdfunding
People invest simply because they believe in the cause. Rewards can be offered (often called reward crowdfunding), such as acknowledgements on an website, raffle tickets, entry to an event, a copy of an album once recorded, regular news updates, free gifts and so on. Returns are considered intangible. Donors have a social or personal motivation for putting their money in or provide feedback and expect nothing back, except perhaps to feel good about helping the project. My.Regional.Community is a Donations / Reward / Vote based site.
Investors receive their money back with interest. Also called Peer-to-Peer (p2p) lending, it allows for the lending of money while bypassing traditional banks. Returns are financial, but investors also have the benefit of having contributed to the success of an idea they believe in. In the case of microfinance, where very small sums of money are leant to the very poor, most often in developing countries, no interest is paid on the loan and the lender is rewarded by doing social good. Australia has a few P2P lenders such as www.societyone.com.au and www.ratesetter.com.au
People invest in an opportunity in exchange for equity. Money is exchanged for a shares, or a small stake in the business, project or venture. As with other types of shares, apart from community shares, if it is successful the value goes up. If not, the value goes down. Australia has legislated crowd-sourced equity funding legislation in late 2017 with new entrants entering the market currently.