What does crowdfunding actually mean? How is it different from crowd investing? And what is important about it? We show what you should consider when it comes to digital crowdfunding.
The most important thing in brief:
- In crowdfunding, many donors give small sums. These have the character of a donation and are intended to help realize beneficial projects.
- Consideration is usually material goods or privileges, but it is not about returns.
- Before participating in crowdfunding, find out what happens to your money if the crowdfunding project fails or does not come to fruition.
- Attention: The terms “crowdfunding” and “crowd investing” are often mentioned in the same breath. Therefore, check on the one hand whether you would like to donate or invest, and on the other hand what the project sponsor actually means by this.
Crowdfunding: what is it actually?
Crowdfundingor German: Crowdfundingis a form of financing certain projects and ideas. Projects are presented and supporters, especially donors, are sought via special crowdfunding platforms. Projects can be, for example, a film, a book or software. The basic idea is that a large number of small financiers (the “swarm”) realize a project together. It's not about returns.
Crowdfunding – crowdfunding of creative projects
In the early days of crowdfunding, projects in the areas of social affairs, art, music, film or literature were mainly financed. The instrument of crowdfunding is still used today primarily by actors who cannot raise the necessary funds in conventional ways – for example through loans – or who perhaps do not want to do so.
Through crowdfunding, for example, followers of an author or musician can contribute financially to the next work and thus support it – or in many cases make it possible in the first place. There are hardly any limits to your imagination. This is how world travelers pay for their trip around the world, which they then write a book about.
“Thank you” for crowdfunding donors
The participation in Crowdfunding is with one donation comparable. In return, as a supporter, you will not receive any interest or dividends, but rather Material goods or certain ones Privileges. For example, you can get a signed version of the book or get exclusive insights into the new film before it is released.
An honorable mention – for example in the film's end credits – is also conceivable. Supporters of a band, in turn, can hope for access to the artist’s backstage area.
In some cases, donors also receive one Donation receipt and can thus take advantage of tax advantages. The consideration granted is often staggered depending on the amount of the donation. Those who give more money receive more exclusive rewards.
Crowdfunding and crowdinvesting – what’s the difference?
Because the financial participation in… Crowdfunding as donation is to be classified, this is the type of participation not about a classic investment.
Although crowdinvesting is usually referred to as crowdfunding and is offered via Internet platforms, it is fundamentally different from crowdfunding.
At the Crowd investing Investors expect that you will get back the money you have provided and also hope to realize high returns even with small amounts. Crowd investing is one Form of investment with the risk of total loss.
Since the two terms crowdfunding and crowdinvesting are often used interchangeably in practice, it is all the more important to be aware of a possible one
- Donation (crowdfunding) or
- Investment (crowd investing)
to take a close look at both the project and the project sponsors as well as the internet platform.
The information about crowdinvesting for consumers is often insufficient. This was the result of an investigation by the market watchdog Finance.
