If your goal is to learn how to invest, it is essential that you master the specific vocabulary of this field. There are many words, acronyms, and technical terms that are frequently used in the world of finance and investments. That is why I am offering you this CROWDFUNDING DICTIONARY so that you don’t miss anything!.
I am creating the most comprehensive glossary on crowdfunding on the internet, and I have made it simple and enjoyable so that you not only learn, but also have fun along the way together!
Why you might be interested in this Crowdfunding Glossary
At Invant APPs we are experts in Passive Income, and I am very interested in you being able to fully understand all the lessons, let me explain a little better:
One of the main problems that you bring to my attention, and which I have noticed, is that on numerous occasions some «More Complex» concepts are not understood well; not because of the term or the idea itself; but because some «Basic, Essential, or Foundation Concepts» are missing without which it will be very difficult to build on them later.
1. What is Crowdfunding and what is it for?
Do you want to know what crowdfunding is and how important it is in the world of investments? Do you want to know what practical uses it has today? In this video, which is just 2 minutes long, you will have everything very clear!
Definition of Crowdfunding
The direct translation of the word «Crowdfunding» would be composed of Crowd (crowd) and Funding (Funds), so its meaning comes to be «collective or multi-person financing».
Crowdfunding, Micromecenazgo or Collective Financing are in practice synonymous
Crowdfunding is undoubtedly one of the best financing options for all kinds of assets (such as real estate), as it directly connects both Investors (Backers) and the Companies and Individuals who launch their crowdfunding campaign (Fundraisers or Crowdfunders) without the involvement of banks or intermediaries.
Crowdfunding, micro-donating or collective financing is a collaborative funding mechanism used by thousands of people and companies worldwide.
On the Canal de Invant Apps You will have more information about this topic.
2. How can any project be financed today?
In the 21st century we have mainly 3 options:
- Lotería or Inheritance.
- Requesting financing from a bank or even a family member/friend.
- Publish your Project on a Crowdfunding Platform
Crowdfunding is a collective financing that is usually carried out online through specialized crowdfunding platforms, where financial intermediaries such as banks and savings banks are avoided in order to obtain the necessary funds for its implementation or launch.
There are usually 2 formulas to publish your projects on these platforms:
The project will proceed if it is successfully funded to 100% of the target amount. Otherwise, the money will be returned to the patrons or investors.
The project will proceed regardless of whether the fundraising goal is achieved or not.
On the Canal de Invant Apps You will have more information about this topic.
3. How Many Types of Crowdfunding Are There?
How many types of crowdfunding exist?
There are 5 different models of crowdfunding financing: Micromecenazgo or Collective Financing. These will vary depending on the «type of benefit or reward» you give to the «donors or investors» in exchange for their contribution:
- Crowdfunding in the real estate sector
- Crowdfunding equity investment or crowdequity
- Crowdfunding of loans or Crowdlending
- Reward-based crowdfunding
- Crowdfunding of donation
On the Canal de Invant Apps You will have more information about this topic.
4. What is Real Estate Crowdfunding?
Real Estate Crowdfunding is a form of collective investment or micro-crowdfunding that allows investors to acquire shares in projects related to the real estate sector.
With this investment system, it is not necessary to invest large amounts of money in a single property; instead, it is possible to invest in several projects simultaneously through the various platforms that currently exist. Undoubtedly, real estate crowdfunding, by its very nature, is one of the best ways currently available to «minimize and distribute the risk of an investment.».
What is real estate crowdfunding?
Real estate crowdfunding consists of applying this micro-investing system to the real estate investment sector. A group of individuals contribute small amounts of money to a real estate project in exchange for a return.
This process benefits both parties. Investors can obtain a profit through this investment, which can be greater than that obtained in other financial assets. On the other hand, developers obtain financing independent of the bank, where it is difficult to obtain a loan.
This method is used to finance real estate properties such as houses, shopping centers, apartments, urbanizations and hotels…
How does real estate crowdfunding work?
The process of real estate crowdfunding is simple. Transactions are carried out through a crowdfunding platform, which facilitates the connection between the real estate developer and the investors.
These platforms are responsible for choosing the projects that will be presented on their websites, thus allowing interested parties to finance them. Each project has a funding goal, that is, a specific amount that is sought to raise to start the project. Investors select the project in which they wish to participate. Some platforms impose a minimum investment limit. For example, Urbanitae requires a minimum investment of 500 euros.
What are the advantages of real estate crowdfunding?
These are some of the advantages of real estate crowdfunding:
- Highly competitive yields, which in some cases can exceed 10%.
- Access to the real estate sector with investments of very small amounts.
- It offers wide diversification in terms of the type of property, the geographical location of the project, and the duration of the investment.
- It represents a more liquid investment than traditional real estate investments, thanks to the existence of a secondary market.
And what are the risks of real estate crowdfunding?
Not everything is an advantage in real estate crowdfunding; there are also significant risks:
- Lack of liquidity: Investment in certain projects is usually long-term, and the money invested cannot be recovered until the project is completed, unless the stake is sold.
- Non-payment: Just as a company can go bankrupt, it can also happen that the corresponding payment is not received.
- Morality: In the context of rentals, there is a risk that the tenant will not meet their payment obligations.
- Urban and market risk: Factors such as war conflicts can compromise the security of real estate investment.
On the Canal de Invant Apps You will have more information about this topic.
5. What is Crowdfunding equity, Investment or Crowdequity?
Equity crowdfunding (or investment) is when participation in the capital of a company is offered as a return. We are talking about collective financing or micro-crowdfunding where people invest in a project and receive shares or shares in it. Shares that can then be sold for a higher price than the purchase price, or that can generate profits from dividend distributions in the future.
Equity crowdfunding differs from other types of crowdfunding in the nature of the return it offers to contributors. Unlike reward crowdfunding, where a product, service, or experience is offered, here we are talking about investment. It has a very important differentiating component, since investors become Shareholders of the funded project.
On the Canal de Invant Apps You will have more information about this topic.
6. What is Crowdlending or Crowdfunding of Loans?
Crowdlending is aimed at financing personal or business projects through investments generally of small amounts made by a small group of investors, the reward of which is the return on investment along with interest stipulated in the loan agreement between the parties.
This is a type of financing that is much cheaper and more economical for the company, as well as usually faster than other funding methods.
On the Canal de Invant Apps You will have more information about this topic.
7. What is Rewards Crowdfunding?
Reward crowdfunding is where a product or service is offered to the person who provides funds or supports the project (sponsors).
It is the type of financing that has the highest volume of collection in the market, in addition to being the model that is best known and most used in the artistic and creative field.
The patrons do not receive monetary rewards, but a sample of products, experiences, or services that the company offers as a form of gratitude, which varies depending on the capital contributed.
On the Canal de Invant Apps You will have more information about this topic.
8. What is Crowdfunding of Donation?
Crowdfunding is a type of micro-donation in which no reward is offered to donors. The primary motivation is altruistic or philanthropic, and donors contribute to the project with the sole aim of seeing it through to fruition.
This type of funding is ideal for social or humanitarian projects, such as helping victims of natural disasters, supporting communities at risk of exclusion, or even helping with individual causes of people, for example, with a serious illness.
On the Canal de Invant Apps You will have more information about this topic.
Community and resources
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