Crowdfunding Vs. Crowdinvesting Vs. Crowdlending — What’s the difference?
This post forms part of the investing basics series at InvestingHero.ch
3 mighty buzz terms and lots of confusion. As always with Investing Hero, lets break it down and start with the basics.
And no, you’ll be pleased to hear I won’t be copy/pasting the same graphs from the latest Lucerne School of Business report that every media outlet has done.
But if you haven’t read it already, its a great read to get a deeper overview on the Swiss lending market.
What is Crowdfunding?
If you’ve heard of Kickstarter or Indiegogo, you’ll be familiar with the concept of crowdfunding.
A simple crowdfunding definition — You pledge a small stake of cash, along with many others into an idea, product or new gadget with the expectation you take the project from concept to reality.
One famous crowdfunding Switzerland example was in 2016, when the ski resort Saas-Fee embarked on a crowdfunding campaign — offering an annual ski pass for 222CHF instead of the usual 1050CHF, if 99,999 people backed the project. Which they did.
At scale these small individual contributions add up.
They enable the creator to reach enough capital in order to move the project forward. From needing machinery or materials to finish a prototype — the crowd help make this happen.
I’ve bought RFID proof wallets, long life battery packs and cute little board games involving angry cats through crowdfunding platforms. It was a manageable addiction.
To offset the guilt of buying silly boardgames, I’ve also committed to donation-based crowdfunding.
These operate on the same model — leveraging the crowd to fund a goal, but for more worthwhile causes.
Instead of gadgets and board games, you are funding people in third world countries for all manner of ventures.
From buying a 25kg bag of rice to sell at the local market in Bolivia, to buying new bike parts for a dude in Kenya to cycle into town to sell fish.
Seriously, I helped fund that. Which is pretty cool.
I’d recommend using Kiva.org and setting the account to ‘auto invest’ repayments in order to fund new loans. If you do nothing else after reading through InvestingHero, open an account on Kiva.org and put some money into it.
The fact you are sitting on a sofa, using a smartphone, means you can afford to put a little into Kiva.
Commit a few swiss francs to make these social projects happen.
Ok, so you get the concept of crowdfunding and crowddonating.
Let’s move on.
Crowdinvesting in Switzerland
Crowdinvesting was born from the concept of Crowdfunding.
Crowdinvesting, aka ‘crowdsourcing’ or equity-based financing, follows a similar model to funding outlined above, with the caveat you’ll be investing and expecting a certain financial return on the profits generated from your capital you’ve committed.
Crowdinvesting platforms in Switzerland are an interesting mix.
Continue reading this article at InvestingHero.ch