Funding can come from a variety of sources, and be organised in a variety of ways. When funding happens, there is usually not only a mix of financing sources, as described above, but often also a mix of financing models. Since the financial crisis of 2008 the number of new digitally enabled financing schemes has grown rapidly. These have lowered the transaction costs and democratized access to investing. To fully understand the financing landscape it is important to get to know the four main financing models: donating, reward seeking, investing and lending.
When you travel full circle through the ecosystem you can notice how the models are shifting. Donating and reward seeking tend to be used for different types of investments then investing and lending. These are natural tendencies occuring within the financial ecosystem. As the ecosystem evolves, other combinations occur. Nothing is set in stone and any combination is worth exploring.
The act of giving money to support a cause. This could be a cause the contributor is directly related to (community funding), but also any other cause that is directly supported by a group of individuals (crowdfunding). Similarly, public funds and charities may donate in the form of grants (institutional funding).
CLICK HERE, to explore the ‘donating section’ of the ecosystem.
The act of investing money in exchange for equity, usually with the intention of achieving a profit. This could be an asset or venture the contributor is directly related to and willing to share ownership and decision making (community funding), but also any asset or venture that can be directly invested in by a group of individuals (equity crowdfunding). Public and private investment funds commonly invest money in exchange for equity (institutional funding). Apart from achieving a profit, making a positive social or environmental impact could be part of the investment goals.
CLICK HERE, to explore the ‘investing section’ of the ecosystem
The act of lending money, usually in exchange for interest. This could be an asset or venture the contributor is directly related to and willing to provide a low-interest loan (community funding). It can also be any venture or organisation looking for a loan from a group of individuals who want to receive a higher interest rate based on a more formalized risk-return evaluation (crowdfunding). Public and private investment funds commonly lend money in exchange for interest (institutional funding). Apart from achieving a profit, making a positive social or environmental impact could be part of the goals related to the loan.
CLICK HERE, to explore the ‘lending section’ of the ecosystem.