Crowd funding is
commonly known as “etofali” in luganda, it’s
a form of collective pooling of resources to support an
initiative/project/venture/cause. People do crowdfunding without even realizing
they are doing it for example here in Uganda people crowdfund weddings and
introduction ceremonies, burial ceremonies, social projects, charity
initiatives mostly community based. Saving groups commonly known as SACCOS are
also a form of crowd funding.
There are a lot
of ways startups can raise funds, but today lets discuss crowd funding as a
form of startup financing; am part of a crowdfunding project to raise capital
for a new business called CAMPUS DOCTOR.
Campus Doctor is a health care
service venture targeting universities students offering quality and affordable
health care services in a serene and trendy environment.
We are trying to collect UGshs60m in
order to set up the business through selling equity to those interested in
being part of this venture,the first of its kind in our country but
successfully working Europe and America.
The share price is 300,000 and so
far 34 shares have been sold in two months fetching 10,200,000.
With a Venture Capitalist putting
up half the required amount 30m provided we raise half, it only means our
target is to now raise 19,800,00.
Health care being a necessity
this is a very feasible and great idea as our market research done last year
pointed out.
If your interested in being part
of the next big thing in the Ugandan health sector feel free to contact me on
what's app 0716223986 for more explanation on how this will work and also
answer any other queries you may have.
So what is
crowdfunding
Crowdfunding is the practice of funding a project or venture by raising
monetary contributions from a large number of people. Crowdfunding is a form of crowd-sourcing and of alternative finance.
Although the concept can also be
executed through mail-order subscriptions, benefit events, and other methods,
it is now often performed via Internet-mediated
registries. This modern
crowdfunding model is generally based on three types of actors:
·
The project initiator who proposes
the idea and/or project to be funded,
·
Individuals or groups who support the idea,
and a
·
Moderating organization (the
"platform") that brings the parties together to launch the idea.
Crowdfunding has been used to fund a
wide range for-profit entrepreneurial
ventures such as
artistic and creative projects, medical expenses, travel, or community-oriented social entrepreneurship projects.
Types
The Crowdfunding Center's May 2014
report identified two primary types of crowdfunding:
1.
Rewards crowdfunding: entrepreneurs pre-sell a product or service
to launch a business concept without incurring debt or sacrificing equity/shares.
2.
Equity
crowdfunding: the backer receives shares of a company, usually in
its early stages, in exchange for the money pledged.
Reward-based
Reward-based crowdfunding has been
used for a wide range of purposes, including motion picture promotion, free
software development, inventions development,
scientific research, and civic projects.
Many characteristics of rewards-based
crowdfunding, also called non-equity crowdfunding, have been identified by
research studies. In rewards-based crowdfunding, funding does not rely on
location. The funding for these
projects is distributed unevenly, with a few projects accounting for the
majority of overall funding. Additionally, funding increases as a project nears
its goal, encouraging what is called "herding behavior". Research
also shows that friends and family account for a large, or even majority,
portion of early fundraising. This capital may encourage subsequent funders to
invest in the project. While funding does not depend on location, observation
shows that funding is largely tied to the locations of traditional financing
options. In reward-based crowdfunding, funders are often too hopeful about
project returns and must revise expectations when returns are not met.
Equity
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. Unlike non-equity crowdfunding, equity crowdfunding contains
heightened "information asymmetries". The creator must not only
produce the product for which they are raising capital, but also create equity
through the construction of a company. Syndicates, which involve many investors
following the strategy of a single lead investor, can be effective in reducing
information asymmetry and in avoiding the outcome of market failure associated
with equity crowdfunding.
Other forms of crowd funding
Software value token
Another kind of crowdfunding is to
raise funds for a project where a digital or software-based value token is
offered as a reward to funders. Value tokens are endogenously created by particular open decentralized networks that and are
used to incentivize client computers of the network to
expend scarce computer resources on maintaining the protocol network. Although funds
may be raised simply for the value token itself, funds raised on blockchain-based crowdfunding can also represent equity, bonds,
or even "market-maker
seats of governance" for
the entity being funded.
Debt-based
Debt-based crowdfunding (also known
as "peer to peer", "P2P", "marketplace lending",
or "crowd-lending") arose with the founding of Zopa in the UK in 2005 and in the US in
2006, with the launches of Lending Club and Prosper.com. Borrowers apply online, generally for free, and their
application is reviewed and verified by an automated system, which also
determines the borrower's credit risk and interest rate. Investors buy
securities in a fund which makes the loans to individual borrowers or bundles of
borrowers. Investors make money from interest on the unsecured loans; the
system operators make money by taking a percentage of the loan and a loan
servicing fee.
Litigation
Litigation crowdfunding allows
plaintiffs or defendants to reach out to hundreds of their peers simultaneously
in a semiprivate and confidential manner to obtain funding, either seeking
donations or providing a reward in return for funding. It also allows investors
to purchase a stake in a claim they have funded, which may allow them to get
back more than their investment if the case succeeds (the reward is based on
the compensation received by the litigant at the end of his or her case, known
as a contingent
fee in the United States, a success fee
in the United Kingdom, or a pactum de quota
litis in many civil law systems). LexShares is a platform that allows accredited investors to invest in
lawsuits.
Donation-based
Charity donation-based crowdfunding
is the collective effort of individuals to help charitable causes. A form of
charity crowdfunding is civic crowdfunding, in which funds are raised to
enhance public life and space.
To be continued................
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