Crowdfunding - The New way of raising capital?

Submission for 'The Edge-Article Writing Competition


Yuva Suneet


The Finance Club, IMI New Delhi

4 months ago | 5 min read

What is Crowdfunding?

Imagine you're a farmer who wants to create a new line of artisanal pickles. Your pickles are delicious and unique, but you don't have the money to buy all the equipment you need to start your business. So, you decide to turn to crowdfunding. You create a campaign on a crowd-funding platform, like Kickstarter or Indiegogo, and you set a goal of raising $10,000 to buy the jars, vinegar, and cucumbers you need to start pickling. You offer perks to people who donate, like jars of pickles or the chance to spend a day on the farm. And then, you wait. To your surprise, you reach your goal in just a few days, with hundreds of people from all over the world chipping in to help you make your pickle dream a reality.

This is the basic idea behind Crowdfunding: instead of relying on a few wealthy investors or a bank loan, entrepreneurs and small business owners can raise money from many people, who are often called "backers" or "funders." These backers can be anyone from friends and family to strangers who are excited about the project. Crowdfunding platforms allow entrepreneurs to create campaigns and share them with a global audience.


Crowdfunding is a relatively new concept, but it has quickly become a popular way to raise money. In 2020, the global crowdfunding market was valued at $22.9 billion, and it is expected to reach $36.4 billion by 2025. This growth is driven by the increasing popularity of Crowdfunding among entrepreneurs, small business owners, and even large companies.

How does Crowdfunding work?

"Have you ever had a brilliant idea but lacked the funds to bring it to fruition? Crowdfunding may be the solution you're looking for!"

Crowdfunding is a process where individuals can raise money for a project, business, or venture by gathering small contributions from many people, typically via the internet. It's a way for entrepreneurs, small business owners, and even individuals to raise money for their projects without debt or giving up equity. But how exactly does it work?

Stage 1: First, an individual or organization creates a campaign on a Crowdfunding supporting platform, such as Indiegogo/Kickstarter. They set a funding goal and a deadline for reaching that goal. They also make a pitch, which includes information about their project, what they hope to achieve, and how the funds will be used.

Stage 2: Next, they share their campaign with their network and on social media. They also use the platform's built-in promotion tools to reach a wider audience. The campaign should be attention-grabbing and persuasive to encourage people to contribute.

Stage 3: People can start contributing to the campaign once the campaign is live. They can choose from different donation levels, each with perks or rewards. For example, a small donation may earn a shoutout on social media, while a more significant donation may earn a product or service. If the campaign reaches its funding goal before the deadline, the funds are transferred to the campaign creator. The funds are returned to the donors if the campaign doesn't reach its goal.

It's important to note that Crowdfunding is not a form of investment, and the backers don't receive an equity stake in the company. Instead, they receive rewards or perks that are specified in the campaign.


Advantages of Crowdfunding

One of the most critical advantages of Crowdfunding is that it allows entrepreneurs to get their ideas off the ground without going into debt or giving up equity. Instead of taking out a loan or selling company shares, entrepreneurs can raise money from the crowd in exchange for perks or rewards. This means they can keep control of their business and not have to pay back the money with interest.

The second advantage of Crowdfunding is that it allows entrepreneurs to test the market for their product or service before investing a lot of money. By creating a crowdfunding campaign, entrepreneurs can see if there is interest in their idea and get feedback from potential customers. This can help them make important decisions about developing their product or service and give them a sense of how to market it.

Crowdfunding also democratizes access to capital. Traditional funding sources such as venture capital and angel investing are often only available to those in specific networks or with certain connections. Crowdfunding, however, is open to anyone with a good idea and the ability to create a compelling campaign. It's also a way for people worldwide to support projects they believe in, regardless of location or financial status. But Crowdfunding is not without its challenges.

Challenges involved in Crowdfunding

One of the biggest challenges is that it can be difficult to stand out among the thousands of campaigns on a platform. Entrepreneurs need to create compelling campaigns that grab the attention of potential backers and make them want to support the project. This can be difficult and time-consuming, but it's essential to the success of a crowdfunding campaign.

Another challenge is that there is no guarantee of success. Not all crowdfunding campaigns reach their funding goal, and even those that do may be unable to deliver on their promises. This can be frustrating for entrepreneurs and backers alike, but it's important to remember that Crowdfunding is a form of investment, and there is always a risk involved. Entrepreneurs must be transparent and realistic about their plans and timelines, and backers must do their due diligence before supporting a campaign.

Despite these challenges, Crowdfunding has proven to be a powerful tool for raising capital and bringing innovative ideas to life. From tech startups to creative projects, Crowdfunding has helped many entrepreneurs turn their dreams into reality. It's also given the public a way to support projects and causes they believe in and get involved in something more significant.

As the crowdfunding market continues to grow, we'll likely see even more creative and impactful campaigns in the future. Entrepreneurs and small business owners will continue to turn to Crowdfund to raise capital and bring their ideas to life. And with the advancements in technology, it will be easier than ever for them to reach a global audience and make their dreams a reality.


In conclusion, Crowdfunding is a game-changer for many entrepreneurs and small business owners, providing them with a new way to raise capital without giving up equity or going into debt. It also allows them to test their ideas with the market and will enable people worldwide to support projects they believe in. While there are challenges to Crowdfunding, the potential rewards are worth it for those who can create compelling campaigns and garner the crowd's support.



Created by

Yuva Suneet


The Finance Club, IMI New Delhi

Pursuing MBA in International Business and Marketing from Institute of Management Technology, Ghaziabad.







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