Crowdfunding is an innovative solution to the funding concerns people commonly have when starting new creative business projects. Working with conventional lenders can be a time-consuming process and it isn't guaranteed to have a positive end. With crowdfunding, people can appeal directly to private donors or investors who are willing to fund their projects in part or full. While this type of funding is often provided without the expectation of returns, this is a also a great way to get aligned with ground level investors who are typically more open to and accepting of innovative business ideas than traditional lenders. Following are five crowdfunding terms that you need to know.
- Donor Input or Mentoring
Donor input can vary from one crowdfunding platform to the next, depending upon the types of projects that are being supported. This term is often used interchangeably with audience interaction, especially on crowdfunding sites that are used for the support of artistic projects. This input helps shape early ideas so they’re in line with donor expectations or more likely to succeed. In this way, those who take part in crowdfunding are not only sharing their wealth, but mentoring new and upcoming professionals in a shared niche.
- Sponsors
Sponsors are often donors who are willing to fund entire projects on their own. They might have a particular interest in an idea or seek arrangements that allow them to profit from the resulting returns. Some projects can attract multiple sponsors, which leads to having more money than needed. In these instances, co-sponsor arrangements can be made so that each investor is paying a fraction of the total start-up costs.
- Barker
A barker is someone who may or may not contribute financially to the project, but who still helps promote the idea so that others can make contributions. These people can be invaluable additions to any campaign given their ability to draw exponential attention to an idea, especially if there is a time limit for collecting funding. Barkers can use social networking platforms, blogs, and other online resources in their efforts to share the news about new projects.
- Progress Meter
This is a visual tracking tool showing how far a project has come in meeting a specific goal. Although it is possible for project creators to have multiple financial goals, these meters are generally used for tracking the primary project target. In some instances, if a goal is not met within a specified amount of time, the related funds will be returned to the individual donors for the project. This gives people the opportunity to rework their ideas so they can become more appealing to potential investors.
- Tip Jar
Tips jars are used on many crowdsourcing platforms by people who are willing to collect money for their projects in any way they can. Rather than establishing a specific donation amount, they keep a virtual tip jar by their ads so that interested parties can drop in change at will. Although the collection process might seem slow going, small amounts can add up fast, particularly when there are ongoing efforts to generate buzz about a new idea.
