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People power: how crowdfunding works


u talk

People power: how crowdfunding works

The power and potential of crowdfunding is under the spotlight in this edition of Utalk. Emmanuelle in Paris asked: “How do you launch a crowdfunding campaign? And are there common rules within the European Union regarding this kind of financing?”

Oliver Gajda, Executive Director of the European Crowdfunding Network (ECN) answered: “To raise funds through a crowdfunding campaign there are four different ways to do this. There’s basically a standard donation-based campaign where you receive money in return for no further reward. You can raise pre-sales or use reward-based structures where you basically receive money and give a small return; like you offer a service or you mention somebody.

“You can also – and this is very attractive for smaller companies – raise equity capital. So you sell a part of your company in form of shares to investors through a crowdfunding platform. Or you can raise loans or credit facilities as an individual or as a small company.

“To launch a crowdfunding campaign: basically you need an exciting idea or product that you have tested with other people before you start.

“You then have to identify a crowdfunding platform, ideally locally (some platforms offer crossborder transactions) that you feel is open and attractive to your aims, where similar rewards or campaigns have already been run. And you start engaging with them. You have to describe the product in detail and convince all your friends, family and others to help you reach your campaign goal on this platform.

“For crowdfunding today, unfortunately, there are no common rules across the European Union from a legal perspective. However there has been a strong discussion in Brussels and in national governments to align that and we hope that in the next few years we’ll have a common rule.”

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