I thought crowdfunding was about donations? That’s a sentence that companies starting up equity crowdfunding hear a lot. Crowdfunding is NOT only about donations, funding (art) projects that you sympathize with, book launches or an expedition to the North Pole.
There’s crowdfunding and there’s crowdfunding. Unfortunately, there are still too many misconceptions about crowdfunding. I thought crowdfunding was about donations?
There are 4 types of crowdfunding:
- Donations: the investor donates money to support a project he likes. It’s not about return but about emotional connection.
- Rewards: a variation on the donation. The difference is that the investor receives a “symbolic reward” like a gadget, a reduction on the product,…
- Loans: the investor lends money that should be paid back. In a world of low interest rate, the motivation is financial.
- Equity: the investor is prepared to invest without being sure he gets his money back. In return he gets shares in the company. The investor is looking for dividends and a return when he sells his shares.
At Herculean, we have selected Equity Crowdfunding. Why? Because we believe it is the perfect match with our vision. From day one, the founders have created a cooperative legal entity with the idea of fans being able to join. This type of crowdfunding is the most regulated one and is regulated by the FSMA (Financial Services & Markets Authority Belgium). The requirements to be able to implement this type of crowdfunding, are much higher than for non-financial crowdfunding.
In the coming weeks, we will shed a light on the most blatant misconceptions on crowdfunding. Together with some other pioneers, we consider it our mission to promote this new way of supporting and engaging entrepreneurship. We hope to inspire other entrepreneurs and scale-ups to start the crowdfunding journey too.