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Crowdfunding, a different approach to financing and communicating!

This funding method appeared in the 2000s and has been growing ever since. In 2016, 128 million francs were raised through crowdfunding in Switzerland, according to Bilan.

Crowdfunding can be achieved in three different ways: through donations, loans, or by selling equities. The common factor is the platform that acts as an intermediary between the projects seeking funding and private parties. A diverse array of projects can be financed this way, from a new music album, to buying shares in a startup in the watch industry.

Donations are crowdfunding’s best known and most common form. In an exchange of a sum of money they give, the private parties receive a compensation related to the project such as an exclusive access to the product and preferential conditions for acquiring it, a sample of the product, or a free access to the service for a given time, etc. There can be as many forms of compensations as there are projects. This method is often used to launch a product aimed at the general public, for cultural, social, and private projects.

The two other forms of crowdfunding are less well-known by the general public and are aimed at more experienced investors, since the compensations are either acknowledgments of debts (loans with interests) or shares in the company. These methods are generally more appropriate for larger projects, such as start-ups or real estate projects, for which the amount is generally higher. The projects are very varied.

The choice of a method rather than another will vary depending on the nature of the project, the company’s wish to open or not to open its capital, the customers targeted by the product or service, the amount needed, or the marketing effect the company hopes to achieve.

Because the system is based on an online platform, the success of a crowdfunding campaign is directly related to the structure’s ability to communicate. The aim is to convince target customers and the company’s network. As a matter of fact, campaigns are a powerful marketing tool that can achieve several desired results. For example, for a new product or service, a campaign can allow the launching company to test the target consumers interest in the product quickly and make modifications accordingly, if needed. It is a manner of funding a first series while communicating about it, and creating a community of customers.

Cécile Enjolras, project manager, Promove : +41 21 943 48 48 | Email | LinkedIn