Imagine you’ve just come up with a great idea for a new product and you can’t wait to start designing, building, and selling it on the market. There’s only one problem: you need money to start your project. You’re still paying off student loans, your parents are saving up for their retirement, and your friends are off enjoying “funemployment.” You’ve tried pitching the project to high net-worth investors, including venture capitalists and angel investors, but they say that there’s too much risk to invest.
This is where crowdfunding comes in. Crowdfunding involves small businesses and entrepreneurs pitching their new project on a website, and raising funds from the broader public. Crowdfunding allows smaller startups to gather investors outside of the realm of family, friends, high-worth investors, and initial public offerings (IPOs). Within crowdfunding, there are a range of different models that startups can use.
The first model is…
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