That leads me to the types of crowdfunding. There are usually three of them, and I’ll go through them in turns . First one is reward crowdfunding. Reward-based crowdfunding has been used for a wide range of purposes, including motion picture promotion, inventions development, scientific research and ecological projects. In this type investors are given bonuses or rewards for reaching certain donation milestones. Second one is debt crowdfunding. Borrowers apply online, and their application is reviewed 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. And the last one is equity crowdfunding. 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. The investor is given a part of the share of the created object. It's like holding company stock . That’s all about types and origins of crowdfunding. Now I’ll tell you more about pros and cons of it. There lots of both, but I selected the momentous ones out of them.
1. The relative ease of registration - legal formalities are minimized , the launch of the project on the platform requires only the identity of the author; 2. No risk to fall under the pressure of a single investor, giving him all the financial instruments; 3. The effect of "word of mouth" - people who have invested in a start-up will support it and advertise among friends and colleagues and attract attention to it (and with it additional investors); 4. Lack of legal responsibility to investors - investments in start-ups are classified as risky financing and if the idea does not "shoot", the author will not have to reimburse investors for their funds . Now let’s pay attention to its disadvantages .
- Fall '19