How Crowdfunding Could Reshape Real Estate Investing

Real Estate in Argentina Should
Be Considered As a Top Property
Destination (Photo credit: International
Real Estate Listings)

Crowdfunding, a new way to raise capital, has been gaining traction lately and it’s clear (at least to me) the result will be far-reaching. Traditionally, entrepreneurs or inventors would self-fund ideas or seek out banks and professional or institutional investors to secure the capital they needed to take their ideas to the next level. With crowdfunding, on the other hand, entrepreneurs can raise capital from a group of smaller investors in a
secure and automated way online. At a basic level, here’s how crowdfunding
differs from the traditional fundraising model:

Traditional Fundraising Model (Simplified)

Idea –> Pitch Banks or Investors –> Funding –> Execute Idea

Non-traditional Crowdfunding Model (Also Simplified)

Idea –> Set Up Crowdfunding Initiative –> Funding Goal Reached –>
Funding –> Execute Idea

This “democratizing” of fundraising allows people outside the traditional investor
 groups and lenders to join in on the process. Kickstarter is still leading the way
when it comes to creative consumer products with over $900 million pledged to
 over 125,000 unique projects. So far, crowdfunding has had the most success with
tangible consumer products. For example, there might be an engineer who is building
a more efficient bike seat and needs $10,000 to get it to market. He can post the project
on a crowdfunding website and immediately have access to thousands (if not millions)
of people and customers who would like to support bringing the project to market.
Once the funding goal is reached, the money is transferred and the project can start.

For investors, crowdfunding means less risky, smaller dollar investments in projects
they care about. For entrepreneurs, crowdfunding is a better alternative to traditional
 investment capital that improves the likelihood of securing the capital required to stay
in business.
Rod Ebrahimi, Contributor - ENTREPRENEURS 

12/12/2013 @ 9:00AM |2,613 views

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