What are the different types of crowdfunding

Crowdfunding - The Different Types

What actually is crowdfunding?

Crowdfunding - a form of financing from the USA - essentially refers to the collection of small amounts of money by many individual donors (also known as "crowd") with the aim of realizing a specific project. A distinction is made between different types of crowdfunding, which differ First and foremost, they differ in the added value that the donors receive in return for their investments.

HOME ROCKET is a crowdfunding platform that specializes in professional real estate projects. Real estate is a form of investment that has been tried and tested over many years, but it is not affordable for every investor because it usually requires a high level of capital investment. With HOME ROCKET everyone now has the chance to participate in a high-quality real estate project on a crowdfunding basis with a small amount (from 250 euros). You can put together your own portfolio of various construction projects. In this way, the profitable real estate market should also be made accessible to small investors.

Below you will find an overview of all subcategories of crowdfunding, as well as some examples. HOME ROCKET offers Lending-based crowdfunding at.

Lending-based crowdfunding

This type of crowdfunding (commonly also called "crowdlending") describes a form of financing in which the investors receive a certain percentage of interest for their invested capital Repayment takes place at terms agreed in advance. Crowdlending can take place between private individuals ("peer-to-peer lending"), or from private individuals to companies ("peer-to-business lending") Private individuals, or the creditworthiness of companies, is usually carried out by reputable platforms or institutes. A higher willingness on the part of the investor to accept a default risk usually means a correspondingly higher interest rate.

A type of lending-based crowdfunding is also implemented for an investment in real estate projects on HOME ROCKET - but by private investors who have a qualified subordinated loan issue to professional real estate developers. The financial transfer takes place exclusively via insolvency-protected trust accounts ofLemon Way KGaA. As a crowdfunding platform, HOME ROCKET is your only point of contact. As an investor, you have the opportunity to access attractive and reputable real estate projects from as little as 250 euros and benefit from the know-how of the professionals.

An example of lending-based crowdfunding: A property developer wants to realize a real estate project and presents its plan on a crowdfunding platform (e.g. HOME ROCKET) in order to set up a certain part of the project financing. Since the project is still in an earlier phase, the developer is offering investors a good return of 7.0% p.a.

Equity-based crowdfunding

This category of crowdfunding is an investment that (like crowdlending) includes financial consideration. Often the investor acquires a stake in a company with his investment in a project and can benefit from the increase in value and the annual profit. This type of crowdfunding usually takes place via the issuance of Profit participation rights or participatory subordinated loans.

With this concept, HOME ROCKET's sister platform GREEN ROCKET has primarily specialized in start-up companies with future-oriented topics such as energy, the environment, mobility and health.

An example of equity-based crowdfunding: A startup with innovative ideas and growth potential is generating its first sales. In order to be able to grow even faster, to open up new markets or to implement further ideas, the young company needs capital. It is aimed at the crowdfunding platform GREEN ROCKET, where the sought-after capital is raised by many investors through a professional crowdfunding campaign. In return for their capital employed, with which they support the growth of the startup, the investors receive a fair share in the company's value and in the annual profit.

IMPORTANT: For every crowdfunding project, observe the associated information data sheet and risk information and check carefully whether the investment is suitable for you.

Reward-based crowdfunding

The most original and probably best-known type of crowdfunding is also called reward-based crowdfunding. As an added value for the investment in a project or company, you will receive in return, for example, a prototype or a goodie as a thank you. In its country of origin, the USA, it is the most common variant. The reason for this was the initially very strong legal regulation of other crowdfunding models - but now there are also very successful equity- and lending-based crowdfunding platforms in the United States. Often creative projects are realized with reward-based crowdfunding, for example in the field of the music or film industry. Ideas for product inventions, where the first investors receive prototypes of the respective project, are also very popular. In the event of success, individual, supposedly small projects can even develop into their own companies - this is possible through a significant overfunding of the given funding amount. Please note that you do not have a share in the success of the company; If the company to which you gave capital in exchange for a goodie or a prototype is sold or goes public, you as a supporter will no longer receive a share (unlike equity-based crowdfunding).

An example of reward-based crowdfunding: An ambitious band wants to produce a new music album and for this reason starts a crowdfunding campaign in order to be able to cover the production costs. Since the musicians have already had a "fan base", many of the fans are willing to contribute a small amount of money to the production and thus act as investors. In return for their investment, for example, investors receive the finished CD before anyone else.

Donation-based crowdfunding

"Donation-based crowdfunding" is probably the simplest variant of crowdfunding. No consideration is expected, the amount invested by the donor is intended purely as a donation. This type of crowdfunding is particularly popular with projects that serve or also serve a good cause to finance associations The primary motto is: Do good through financial help.

An example of donation-based crowdfunding: A well construction project is to be implemented in a very poor African region. To make this project possible, a crowdfunding platform is consulted and it organizes the collection of donations.