Crowdinvesting vs. Crowdfunding


What Is the Difference between Crowdinvesting and Crowdfunding?

In the media, the terms crowdinvesting and crowdfunding are often used synonymously. Even though both are similar ways of financing, they differ greatly in some aspects. Both refer to financing by the crowd.

Now, let us look at the differences:


Crowdinvesting (Equity-based Crowdfunding)

Crowdinvesting is equity-based crowdfunding. In the case of equity-based crowdfunding – the type used on Companisto – users invest in a start-up and receive shares in return. Investors become shareholders of the start-up and benefit from the profits of the start-up and from the possible sale of the start-up to a large investor (also called “exit”).

There are many different motivations to participate in equity-based crowdfunding. While some people simply want to support a good idea and its implementation, other microinvestors primarily focus on financial aspects, especially participation in the sale of the company.

In a very general sense, it was not possible for private individuals to invest in start-ups in the early stage before equity-based crowdfunding was introduced. This has now changed because of equity-based crowdfunding on Companisto. Equity-based crowdfunding also enables private individuals to participate in start-ups by means of small (or large) investments.


Crowdfunding

In the case of traditional crowdfunding, users receive no shares in a start-up but a symbolic return, for instance a CD.

Crowdfunding is (still) more widely known than equity-based crowdfunding. This is simply due to the fact that this phenomenon has existed for a longer time. To be precise, it has always existed. 

In the case of crowdfunding, people cooperate to finance a specific project, which is usually charitable or artistic and probably would not have been realized without the crowd. If there is a return in the case of crowdfunding, it is non-monetary. Thus, crowdfunding may be compared to a kind of donation. People help other people realize a project and are motivated by altruism. 

To be precise, composers such as Mozart and Beethoven already used crowdfunding to finance their concerts and compositions – by means of a priori subscriptions that offered donors exclusive access to the works as a reward.

At the beginning of this millennium, crowdfunding platforms like Artistshare and SellaBand, which can be used by fans to support their favorite artists in exchange for CDs or access to exclusive concerts, came into public focus.

In the U.S., the home of crowdfunding, the two platforms Indiegogo and Kickstarter helped crowdfunding make a breakthrough. Projects such as Pebble received millions of dollars in funding on these platforms, and donors usually receive a sample of the crowdfunded product.

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The acquisition of this asset involves considerable risks and can lead to the complete loss of the assets used.

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