CROWDFUNDING3Crowdfunding MechanismCrowdfunding and crowd-sourced funding are two different methods of financing a corporation or idea. In crowd sourced funding, the entrepreneurs received funding for their ideas but the financiers take a certain part of their shares1. The crowdfunding is a particular part of a crowd sourced funding, in which the funding is collected through the crowd. The crowdfunding is separate from the traditional method of funding such as a loan from banks, venture capitalists, and angel investors. These investors are limited in numbers and prefer to invest in large investment projects. The crowdfunding provided the perfect platform to new entrepreneurs to present, form and share their inventive ideas, by providing them a large number of investors and high financing options. The entrepreneur and financiers connected with each other through online websites and social media platforms2. There are four types of crowdfunding option available such as reward, equity, charity and landing based crowdfunding3. In the reward centered crowdfunding, the financiers invest in the project of entrepreneurs because of the rewards provided by them. In equity centered crowdfunding, the financier’s gets share of the corporation for the investment provided by them. The charity centered crowdfunding is based on social causes; the investors did not get any monetary benefit in this crowdfunding. In case of landing centered crowdfunding, the investment provided by financiers are considered as a loan and entrepreneurs has to return it with interest. There are some steps that must be followed by entrepreneurs for crowdfunding of their ideas. The most important step is related to providing complete and correct information to the investors regarding their idea4. All the necessary information must be provided to the financiers before the collection of crowdfunding. The information includes details regarding product, facilities, objectives, required investment, the time frame for the manufacturing of product and rewards provided by the company for their investors. Entrepreneurs can post their business offer on various crowdfunding websites, available online to invite financiers5. 1Paul Belleflamme, Thomas Lambert, and Armin Schwienbacher. "Crowdfunding: Tapping the right crowd."Journal of business venturing29.5 (2014): 585-609.2Helen G. Klaebe, and Rebecca Laycock. "How to work the crowd: A snapshot of barriers and motivations to crowdfunding." (2012).3Jeff Fitzpatrick, et al.Business and corporations law. LexisNexis Butterworths, 2011.4Carol Royal, and G. Sampath S. Windsor. "Microfinance, crowdfunding, and sustainability: A case study of telecenters in a South Asian developing country."Strategic Change23.7-8 (2014): 425-438.5Franck Juredieu, and Sébastien Mayoux. "Crowdfunding Legal Framework: An International Analysis☆."International Perspectives on Crowdfunding: Positive, Normative and Critical Theory.

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