Crowdfunding, also known as crowd funding, involves the financial evaluation and execution of a business, project, or initiative by multiple teams. This method, widely used and preferred in the global trade network, offers significant advantages, prestige, and convenience for aspiring entrepreneurs and company owners. It is a crucial fund that helps individuals who want to bring a project, initiative, or production to life by providing small, medium, and large-scale investment budgets, enabling entrepreneurs to turn their projects into commercial ventures.
Crowdfunding Explained
In the global trade network, crowdfunding refers to a platform developed by expert teams where entrepreneurs can present and introduce their projects to a broad audience. The three essential elements of crowdfunding are:
- Project owner (entrepreneur)
- The person or persons funding the project
- Crowdfunding platform
One does not need to be an entrepreneur to join a crowdfunding platform. Individuals or groups working on a social responsibility project or seeking to profit from a product or service can benefit from these platforms. Participants can invest in projects or make non-refundable donations to support social responsibility initiatives.
Types of Crowdfunding Platforms
Reward-Based Crowdfunding Platform
Reward-based crowdfunding platforms incentivize investors by offering them rewards as a form of gratitude. These rewards strengthen the communication between investors and entrepreneurs by thanking those who provide financial support.
Donation-Based Crowdfunding Platform
Donation-based crowdfunding platforms are less commonly preferred, especially in Turkey. In this type of crowdfunding, investors do not receive any rewards. They make voluntary financial contributions to support entrepreneurs or social responsibility projects.
Equity-Based Crowdfunding Platform
Equity-based crowdfunding platforms, not yet operational in Turkey, involve investors providing financial support in exchange for equity in the entrepreneur’s project. This platform, similar to angel investing, is awaiting regulatory approval.
Advantages of Crowdfunding Platforms
Crowdfunding platforms offer numerous advantages, including:
- Providing necessary funds and financial support to project owners.
- Allowing entrepreneurs to promote their products before launching them, thus facilitating product improvement based on feedback.
- Offering significant references for entrepreneurs, making it easier to attract further financial support from investors.
- Providing early feedback, which helps entrepreneurs make improvements without incurring high AR-GE costs.
- Operating online with no participant limits, allowing projects to reach a global audience.
- Enabling products to be introduced to the target audience quickly and efficiently.
Disadvantages of Crowdfunding Platforms
Despite their benefits, crowdfunding platforms also have some disadvantages:
- Public nature of the platforms can compromise the confidentiality of the project.
- The pace of support from angel investors may be slow, hindering rapid market entry.
While crowdfunding platforms differ from other investment methods, they offer access to a broad customer segment globally. However, it is essential to present your project with confidentiality policies to prevent it from being hijacked by others. Securing investment through crowdfunding can help cover many costs associated with bringing your project to life and ensures that your product reaches a large audience, promising high returns.
