“Crowdfunding sites provide startups customer validation before committing big money returns to Investors.”

Types of Crowdfunding Platforms:

• Donation Crowdfunding. A donation-based platform allows people to give money without offering tangible rewards. People donate to these sites because of the satisfaction of knowing they’re contributing to a worthy cause. Such platforms are common for nonprofits and for causes such as helping students across the world, or even helping individuals pay for devastating medical expenses.
• Rewards Crowdfunding. These platforms usually promise backers a tangible “thank you” such as a T-shirt or gadget. They are often “pre-selling” a product or service without sacrificing company equity, meaning that all ownership and copyrights remain with project owners.
• Equity Crowdfunding. On sites that have equity crowdfunding, investors pledge money in exchange for equity or shares in the company.
• Debt Crowdfunding. Campaigners on debt crowdfunding sites ask investors to loan them money, with a promise to repay them on a fixed repayment schedule with a specific interest rate during the term of the loan.
• Flexible and Fixed Funding. Flexible funding allows a campaign to keep contributions, while fixed funding returns money to donors. Since crowdfunding thrives on trust, an additional consideration for flexible funding is that if you keep the money, but never create the product or complete the service, backers might become disgruntled.

 As an entrepreneur, you should carefully examine the different types of crowdfunding platforms and figure out which best fits with your company and its financial needs. Crowdfunding, when done correctly, can be a crucial tool for an entrepreneur’s success. Startups can use crowdfunding sites to get consumer validation before they commit big money. No matter the size of the company, crowdfunding is frequently used as an alternative avenue to replace traditional venture capital money or unattainable bank loans.