What is Crowdfunding?

The Internet is filling up with platforms that offer the possibility of finance projects through modality Crowdfunding, and this mechanism has already become such an important referral system for creatives as well as investors that some economists think that the future could be a destabilizing element for the system of bank loans as we know it today.

At the same time, Internet experts assure that in the Crowdfunding lies one of the most interesting possibilities for the development of the phenomenon of the Social Web. But exactly What is crowdfunding? and how it works?

The English term comes from two different words: “crowd”, which means mass, crowd, and “funding”, financing. We could literally translate Crowdfunding with “collective financing”, but the use of the English term was affirmed as the majority also internationally and in Spanish-speaking countries.

Technically, the Crowdfunding mechanism is extremely simple, and this is precisely where part of its strength comes from: any user (a private, a company, an association) have a project and look for resources to finance it, you can open a public campaign to find micro investors in Crowdfunding platforms, offering small advantages in exchange for the payment of one or more installments of participation.

Some platforms are responsible for freezing the money until the established budget has been achieved, others only do the processing. The projects are disseminated on social networks and made known through the powerful viral formula that is typical of news spread on the Internet. In any case, once the project has obtained the resources, it can move forward, and the participants will be able to enjoy their “earnings” that will vary according to the type of activity to be carried out.

Sometimes projects proceed in stages, to ensure greater control by micro investors. All without going through credit banks or other forms of traditional financing, and without obligations to return the money, since in the end a part of the project itself will be shared.

Actually Crowdfunding offers a concrete possibility for many ideas of different natures. For example, it is becoming very popular to finance low-cost films, and in this case the most classic reward for micro investors will be to have their names in the final titles and attend the first performance, but in some cases the possibility of visiting the backstage or participating in the production is also offered as troupes.

Other very common areas for Crowdfunding are the financing of publications, scientific research, artistic projects, start-ups, social campaigns to defend the rights of a community or a group particular. It may be about opening a restaurant that will offer work to disabled people, conducting research to combat a rare disease, seeking resources to remodel an old historic house that is about to fall into pieces... really anything, as long as it manages to capture the attention of network users social.