What are the different types of crowdfunding?

Donations, participatory loans, equity, real estate crowdfunding and much more: discover with us the different types of crowdfunding!

👇If you too would like to start your online journey, click below!👇

In a nutshell: what is crowdfunding?

Crowdfunding is a fund-raising method that involves many people contributing financially to a project via an online platform.

The 5 types of crowdfunding

1. Charitable giving or crowdfunding

Donation-based crowdfunding, also known as charitable crowdfunding, is one of the most popular types of crowdfunding. It is based on a simple principle:

people, moved by a cause or project, decide to make a financial contribution to it, often without expecting any financial return.

The funds raised can be used to finance humanitarian, social, cultural, artistic or business development projects.

In this type of crowdfunding, the consideration can take various forms:

• a simple thank-you,
• a postcard,
• a by-product,
• an invitation to a project-related event, etc.

As a result, many donation campaigns are flourishing on dedicated platforms such as Tiing, Ulule or KissKissBankBank.

2. Participatory lending or crowdlending

With crowdlending, the investor lends a sum of money to a project owner (an individual or a company), in exchange for which he or she receives interest. The interest rate is generally fixed in advance, and may vary according to the risk involved in the project.

Crowdfunding can be an interesting alternative for people who don’t have access to traditional bank loans, or for businesses looking for financing.

Platforms such as Lendix and Unilend put investors and project promoters in direct contact with each other.

3. Equity crowdfunding

Equity crowdfunding is a type of participatory financing that enables investors to acquire shares in a company. The investor thus becomes a shareholder and can expect a return on investment if the company grows and generates profits.

This type of crowdfunding is particularly interesting for young companies in the development phase, who need capital to finance their growth.

Platforms such as Wiseed and Anaxago make this process easier.

4. Real estate crowdfunding

Real estate crowdfunding is a type of participatory financing specific to the real estate sector. It enables private individuals to invest in real estate projects such as :

• new housing construction,
• renovation of old buildings,
• or the purchase of rental properties.

This type of crowdfunding is interesting for people who want to invest in real estate without having to deal with the constraints associated with ownership.

Platforms such as Homunity and Fundimmo help to facilitate these investments.

5. Royalty crowdfunding

Finally, royalty-based financing is a type of crowdfunding where investors receive a share of the sales or profits generated by the project in return. This model is particularly interesting for cultural or entertainment projects, such as the production of a film, play or music album.

To invest in royalty crowdfunding, turn to WeDoGood.

The stakes and challenges of crowdfunding

Crowdfunding, despite its many advantages, is not without risk. For investors, the main danger lies in the possibility of losing their investment. Indeed, a project financed via crowdfunding is not guaranteed to succeed, and if the company goes bankrupt, investors can lose all or part of their stake. So it’s important to invest wisely, diversifying your investments and betting only what you’re prepared to lose.

For project owners, crowdfunding also presents challenges. The first step is to convince investors, which requires good communication and a solid project. Then, once the funds have been raised, you need to be able to complete your project on time and on budget. Finally, you also need to take into account the fees charged by crowdfunding platforms, which can be quite high.

Despite these challenges, crowdfunding remains an attractive financing tool for both businesses and individuals. It makes it possible to carry out projects that would not otherwise have been possible, and to involve the community directly in their success.