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Crowdfunding is a relatively new concept in the world of finance and, in particular, the fundraising sector. It has enormous potential and is expanding rapidly, but, what is it exactly? How did it begin, and how many types are there?

The crowd

The term ‘crowdfunding’ can sound complex, but its meaning is actually quite simple. The word itself is self-explanatory: it is the sourcing of financial backing, generally via the internet, for a company or project by appealing directly to the "crowd" (usually the general public). It’s an alternative - and a complement - to more traditional fundraising channels that are mediated by banks and financial institutions, such as private equity, venture capital funds and angel investors.

Its innovative approach revolutionises the traditional dynamic - with crowdfunding you start from the grassroots. As a matter of fact, the general public is right at the heart of crowdfunding. Anyone can show their trust and appreciation for any project or product that they use in their daily lives. As mentioned, crowdfunding campaigns are usually run through the internet, allowing supporters immediate access: word of mouth has no limits online.

Many artists, political parties and startups have chosen crowdfunding to grow their projects thanks to the contribution of the powerful community network. Even established multinationals with a large following have opted for this form of financing, such as Tesla, who turned to crowdfunding in 2016 to finance the implementation of Model 3.

4 shades of Crowdfunding

One word, many shades. Crowdfunding helps give life to projects that are often aiming at innovating or totally revolutionising a specific sector, and it does so by making its own public a fundamental part of the growth process.

There are various types of crowdfunding:

Donation Crowdfunding is a donation-based crowdfunding method often used by charitable organisations and, generally, for charity events.

Reward Crowdfunding is still donation-based, but, as the name suggests, it offers rewards to its funders. The reward can take many forms; such as gifts, or real life experiences.  

Lending Crowdfunding allows companies to raise funds by effectively taking out a loan from its backers, which is then repaid to them over a set amount of time, with interest.

Equity Crowdfunding is the most successful method in the Fintech sector. With this type of crowdfunding investors become, to all intents and purposes, business partners, as in equity crowdfunding companies sell securities in exchange for backer financing. This means that investors stand to make money if the company they invest in grows.

This is precisely the way we have chosen for our new ‘Grow with Oval’ campaign. This will allow us to share our growth and future successes with all the users who believe in us and help us improve our app every day.

Equity crowdfunding

Equity Crowdfunding differs greatly from other types of fundraising. By investing money in a project you effectively buy shares - or other securities - and you so become, in effect, a business partner.

Equity Crowdfunding is a growth and development opportunity for many sectors with innovative projects. Some examples?

BrewDog, founded in 2007 by James Wyatt and Martin Dickie is one of the most famous unicorns in the UK. The year it was founded it launched a crowdfunding campaign to raise £10 million, offering shares in exchange. At the end of the campaign the total raised was £26.2 million. At the moment, the company’s estimated value is £1.8 billion.

Tossed, the salad bar chain, launched a crowdfunding campaign to celebrate their ten year anniversary and to coincide with their first store opening in Dubai. They offered investors a stake in their company, and the campaign was so successful it actually overfunded by 169%: raising £1,269,830 in a month. Because of this success Tossed was able to offer their investors more than just a stake in the company, but also added perks such as 50% off purchases in store.

So, why not think about investing in a product that you use every day, that improves your life, and that has helped you save some money and start investing? Oval’s Equity Crowdfunding will allow you to take an active part in the company’s growth, and you will also have a share quota corresponding to the amount you have invested. And, last but not least, you will become part of a thriving investor community who stands to share in our future projects and successes.

This is what happened in our first crowdfunding campaign in 2018. We raised more than £500,000 in just 72 hours and we got to share our project with more than 900 new partners, friends and testers. Now we are ready for a new crowdfunding campaign that will help us grow even more - are you with us?

Your capital is at risk, and past performance may not be a reliable indicator of future results. Oval Money is not permitted to  provide financial advice, and if you have any questions please consult  an expert.

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