Crowdfunding is a form of funding where funds are raised directly from the community. The community invests into a project or company directly, often through an online platform. This means the investment made also carries the risk of the project or company directly. So, if the project or company fails the investors will lose their money. It also means there can be direct contact between the project or company and its investors and potential benefits can also be given to the investors directly.
For the funds that are raised in this way the community investors can receive reciprocation in several forms:
- A set interest rate paid yearly or at the end (in case of loans),
- A dividend which is tied to the result of the company that is financed (in case of equity),
- A different reward like a reduction in energy prices (in case of reward-based crowdfunding). Or anything else the investors and the project agree on as a suitable reward for the money invested.
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