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Which Type of Crowdfunding Is Best for You?

In her book, Cash From the Crowd, Sally Outlaw, founder and CEO of crowdfunding website Peerbackers, reveals the secrets of funding your business with help from colleagues, peers, family, friends and even perfect strangers through a crowdfunding campaign. In this edited excerpt, the author explains the five types of crowdfunding to help you decide which might be right for you. Even though many people think the term crowdfunding is universal, there are actually multiple options available for those needing to raise funds. These models of crowdfunding basically break down into those that offer a financial return for backers and those that do not. Choosing the best form of crowdfunding in which to engage is the first decision an entrepreneur must make before moving forward. Options include a donation model, a reward model, a debt model, one that offers royalties, and finally the newest approach, which allows equity (the purchase of company shares in exchange for the backing). 1. Donation. This is the most straightforward approach, in which a contribution is made to a project or cause, and the donor doesn’t receive anything in exchange other than a good feeling for supporting something in which they believe (and perhaps a tax write-off). This approach is more often […]

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