Crowdfunding involves raising money from a large group of people to finance projects. A kind of crowdsourcing and alternative finance, its aim is to bring investors into contact with project owners via an internet platform.
This mechanism enables money to be collected (in the same way as fundraising) from different people to carry out projects in a wide range of fields, from real estate to technology and culture.
Today, crowdfunding is a practice governed by specific regulations put in place by the ordinance of May 30, 2014, followed by the decree of September 5 of the same year.
In crowdfunding, two parties are brought together:
- Investors: these are the people who offer money to finance a project they believe in.
- Creators: these are the project owners seeking funds to implement their ideas.
Of course, the investors who fund the projects receive something in return. Sometimes it's a simple reward or gift.
Other times, it's a share in the capital, which suggests a certain return on investment.
However, as with any investment, there’s no guarantee that the business's project will succeed. Crowdfunding can therefore entail a risk of total or partial loss of the capital invested.
In this context, it’s in the investor's best interest to assess the risk carefully before funding a campaign.
There are multiple types of crowdfunding:
- Donation-based: the investor decides to support a project, but expects nothing in return. Very often, in the case of a cultural project, they nevertheless obtain a reward, such as a CD or a free ticket to a concert.
- Reward-based: the investor supports a creative, entrepreneurial, or technological project in exchange for a reward related to the venture.
- Debt-based: the money is advanced by the investor, before being repaid with or without interest by the project owner, according to a predetermined schedule.
- Equity: the investor receives financial securities (shares, bonds, etc.) in exchange for their money.
There are also several types of crowdfunding platforms:
- Crowdfunding platforms for subscribing to financial securities issued by an unlisted company. These are platforms for making investments.
- Platforms offering donations or loans, with or without interest.
