What are the types of Crowdfunding?

Business Knowledge

If people ever need money, then they first take help from their family or friends but sometimes there are such situations that even those people are unable to help, so people borrow money from lenders, banks or other financial institutions but it has to complete many types of formalities, which takes a lot of time. So in that situation, people use crowdfunding to raise capital fast. There are also types of crowdfunding, which we will discuss in the brief.


Crowdfunding is a social platform from which people collect money according to their needs. If it is said in easy language, then people collect donations from there.

In the past, donations were collected from house to house by telling them their trouble and people used to give money according to their financial status. But in today’s time there is no need to go anywhere to collect donations because crowdfunding is made for this purpose and people who know about it, they also take full advantage of it by showing their needs or conditions.I hope now you must have understood what crowdfunding is exactly.

Some people become confused with crowdsourcing marketing and crowdfunding. Both are different meanings: Crowdsourcing is the platform where a large number of people show their creativity by giving some ideas in different fields and  people also get innovative suggestions whether it is financially or personally. On the other hand, Crowdfunding is the way of collecting money from people according to their needs.

Benefits of crowdfunding

  • Crowdfunding is the IT platform where people can meet their requirements.
  • It facilitates many innovative business ideas with incentives.
  • People can easily keep their views without any hindrance.
  • It is also used for arranging funds for ventures.
  • It also promotes natural disasters (such as earthquakes, floods, Tsunami) happening in any country so that people can help those people who suffer with these disasters.
  • It also helps those people who cannot afford hospital expenses for treatment such as cancer, heart disease etc.

Types of crowdfunding

  • Investment- based crowdfunding: There is a definite crowdfunding where people invest their money for future purpose so in that future if they want to start something like business, they want to invest in properties like houses, flats, buildings, hospitals and  social works. For example, If you want to start your company and you want money now for company requirements like assets, funding, etc so you can withdraw money from crowdfunding that you were investing in it.
  • Loan-based crowdfunding: This is such as crowdfunding from where people can take a loan for their own reasons of interest, just like people take a loan from a bank or other financial institutions on interest. In this platform people invest their money, known as investment based crowdfunding, so other people can take loans on interest from those people and pay interest also. For example, If you want to start a school, and you need some money for a startup so you can take a loan from there on interest.
  • Reward based crowdfunding: This is reward based crowdfunding in which people invest their money and other other companies give rewards to them in return for that money. For example, Like you invest money in crowdfunding and a company takes that money from you for their business requirements and in return, they give you a property, gifts, prize, provide a reputed position in the company.
  • Donation based crowdfunding: In today’s date, this is the most popular and most frequent crowdfunding. People know the most about it and fully take advantage of it. Its name suggests that it is a donation-taking platform from where you can improve your condition and people give money without expecting any return and interest, they give money free. For example, suppose that your family member is fighting with a major disease like cancer, heart disease and you need money immediately for his treatment so you can take help from crowdfunding by telling about his critical condition through post, audio, video. So people can give money directly in your account so this is called donation based crowdfunding where you can collect a lot of donations. 

If You have heard that there was a person named Kanhaiya kumar who collected Rs.28 lakh in 28 hours on a Donation crowdfunding platform. 

It’s not that donation is taken only for illness, many people collect donations for their education, marriage or other social purpose.

So there is a online social platform where people can easily meet their requirements whether for business, personal, social and so on.. There are a lot of crowdfunding sites in which different kinds of people visit and raise money for different purposes such as education, marriage, women’s education, animals, hospitals, etc. but people are also aware, alert and must be careful at the time of raising funds, invest funds, provide funds.

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