Crowdfinance – Direct small investments

During the last years different forms of crowdfinance have emerged. The term most commonly used is crowdfunding. Crowdfunding basically can be divided into four categories: donation-based, reward-based, lending-based, equity-based.

Donation-based crowdfunding is a crowdfunding model where funders donate to cause that they want to support, with no expected compensation. It is mainly used for social projects like charitable collections or the financing of art projects. In the reward-based crowdfunding model the funders’ primary objective for funding is to gain a non-financial reward such as a token or in the case of a manufactured products, a first edition release. Lending-based crowdfunding, also known as P2P-lending, describes a crowdfunding model where funders receive fixed periodic income and expect repayment of the original principal investment. Last but not least there is equity-based crowdfunding. Here funders receive compensation in form of equity or a revenue- or profit-share arrangement. With this, investors are able to participate in the increase of the company value.

All around the world the number of crowdfunding platforms is still rising as well as the number of projects and credits financed by them. For investors with a focus on monetary returns lending-based and equity-based models seem to be an interesting investment opportunity as the possible returns seem to be above average.

To test the possibilities with crowdfunding I will look for suitable crowdfunding websites and projects to invest in. As there are quite many, the screening for sites and projects will take some time. I will write about my search and investments in the blog. Until then you can read my master’s thesis here (in German).

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