Crowdfunding

Crowdfunding refers to a type of financing in which a variety of Internet users provide money for a specific project. Example include the financing of start-ups or art and music projects.

General information

The first crowdfunding project was started by Brian Camelio in 2003. With ArtistShare, musicians were to have the chance to finance an album through supporters without being tied to a record label. Crowdfunding is a relatively recent phenomenon in Germany, but even so, there are quite a few successfully funded projects such as film productions.

Crowdfunding takes advantage of the potential of a broad mass of people, as is the case with crowd testing and can be categorized with crowdsourcing. The principle is that each person from the crowd provides a relatively small amount of money and receives a return in the form of shares, goods or payouts based upon the project’s success. The transactions are handled on a crowdfunding site on the Internet, where the project is first introduced. Usually there is a minimum contribution per supporter and a general minimum threshold that must be achieved so that the project can be started.

Crowdfunding types

Crowdfunding is conducted on various platforms that are specialized in specific niches and market sectors. An innovative idea in a particular niche will be presented on such a platform and promoted. This is often done in the form of presentations and short videos to convince potential investors about the idea. The correct choice of a suitable platform is extremely important for the initiators of a project, on the one hand, to reach a sufficient amount of supporters and on the other, to adjust the process to the requirements of the project. Depending on the nature of what the supporters will receive in return, crowdfunding is distinguished by several models. [1]

1. Silent participations (lending-based): The donor contributes their amount to the project, but does not have the right to participate in decisions, etc.

2. Rewards (reward-based): The donor receives rewards in the form of goods, services or first purchase rights.

3. Immaterial values (donation-based): The donor makes a donation, but gets no tangible return.

4. Shares (equity-based): The supporter acquires shares in the company. The funding amounts are, as a rule, much higher. This is usually referred to as equity crowdfunding.

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There is usually no guarantee of the success of a project. Even if it is successfully funded, the business idea can fail on the market. This is particularly true for crowd investments. This is why economists speak of venture capital, since there is no guarantee and invested money can be lost. Therefore, caution is advised in deciding whether a project should be funded. Crowd funders should look at all the information about a project in detail and only then decide whether they want to support it. Borrowers will build confidence by presenting the project with all its nuances and a solid business plan. A good idea can fail due to poor implementation, while a less good idea can be successful with good implementation.

Examples of crowdfunding platforms

  • Startnext: Startnext is the largest crowdfunding platform in Germany and Austria. The focus is on innovative, creative ideas that can be financed through crowdfunding.
  • VisionBakery: VisionBakery lets you create your own project website and also offers personal consultation.
  • Krautreporter: This is a platform that provides an opportunity to fund journalistic projects. It is committed to free, unbound journalism which sets itself apart from tabloid or sensational journalism.
  • Science Starter: This is a platform that focuses on the financing of scientific and research projects. Science communication is part of this.
  • SellaBand: SellaBand wants to give international artists and musicians the opportunity to produce albums and EP’s, without being bound by the requirements of music companies and record labels.
  • Indiegogo: One of the most popular platforms for crowdfunding. Indiegogo is now available in different languages and countries. Indiegogo services different areas and topics such as film, music, small businesses, and technology projects.
  • Kickstarter: Kickstarter is the largest crowdfunding platforms worldwide. It is headquartered in Brooklyn, New York. A number of topics and areas can be funded through crowdfunding on this platform but the focus is on music and art projects.

Importance for search engine optimization

SEO aspects can be of importance to the borrower. When a project is launched, usually a website will also be created for it or a specific platform will be used to present the idea. All SEO tricks of the trade can be put to use in order to attract the greatest possible amount of people and especially crowd funders. Being found by a search engine when a specific term is entered is the first step that prospective supporters take to find out about a project.

Thus, content and page-related aspects, such as what keywords have been selected and understandable text with relevant contextual information, show the search engines what it is all about. The text markup, for example, with headings and clean programming of the website are important signals for search engines. Off-page aspects cannot be dismissed out of hand either. Activity in social media, recommendations on blogs or backlinks through business partners and reputable media can bring a project to the top of the search results, whether it is a website or crowdfunding page.

References

  1. Will the Real Crowd Funding Model Please Stand Up? Forbes.com. Accessed on 01/04/2014

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