Crowdfunding is the financing of a project through contributions from a larger number of people, usually via a specialised platform. It exists in several forms: reward-based, with a product delivered in advance, donation-based for public-benefit projects, and lending-based and equity-based with a stake in the company. Compared to a grant, it has three advantages for a company – speed, the absence of project administration, and above all validation of demand, since an unsuccessful campaign is a cheap answer to the question of whether anyone wants the product. The disadvantage is the demands of the campaign itself: it needs prepared content, video, a community reached out to before launch, and the ability to deliver the promised rewards. The tax and accounting treatment differs according to the type of campaign and needs to be resolved in advance, as do obligations towards backers. Expect the platform to charge a commission, and that part of the budget will be consumed by the campaign preparation itself and the production of the rewards.
See also: Market testing before entry, Grants for Startups, Financial instruments.
