Fundrise, Kiva, Kickstarter, and Indiegogo are all examples of what type of informal risk capital?
Angel groups
Angel funds
Crowdfunding
Small business investment companies
The Correct Answer and Explanation is :
The correct answer is Crowdfunding.
Explanation:
Crowdfunding is a method of raising capital by collecting small amounts of money from a large number of individuals, typically via online platforms. Fundrise, Kiva, Kickstarter, and Indiegogo all operate as crowdfunding platforms, but they cater to different types of fundraising needs.
- Fundrise: This platform specializes in real estate crowdfunding, allowing individuals to invest in diversified property portfolios without needing large amounts of capital.
- Kiva: A micro-lending platform that provides small loans to entrepreneurs and businesses in underserved communities worldwide. It focuses on social impact rather than financial returns.
- Kickstarter: A rewards-based crowdfunding platform where creators (artists, entrepreneurs, and innovators) present projects and raise funds from backers. In return, backers receive non-equity rewards such as early access to products.
- Indiegogo: Similar to Kickstarter, Indiegogo supports creative projects, tech innovations, and business startups. However, it also allows flexible funding models where campaigns can keep funds even if they don’t reach their goals.
How Crowdfunding Differs from Other Risk Capital:
Unlike angel investors or venture capitalists, crowdfunding allows businesses and individuals to raise funds without giving up equity or taking on large debts. It is considered informal risk capital because it does not involve institutional investors or regulated financial mechanisms like venture capital funds.
Benefits of Crowdfunding:
- Access to Capital: Allows businesses to raise funds without traditional financing.
- Market Validation: A successful campaign shows demand for the product or service.
- Community Engagement: Creates a direct connection with potential customers and supporters.
Crowdfunding has revolutionized how startups and creative projects get funded, democratizing access to capital beyond traditional investment channels.