
- Rewards model. Many platforms, such as IndieGoGo, allow startups to solicit funding commitments from non-professional investors in exchange for a pre-defined reward or perk, such as a T-shirt or other recognition, but no ownership in the company. The crowd gets the satisfaction of helping, with minimal risk, and no expectation of any high return.
- Product pre-order model. With this model, a startup pre-sells their product early, at a cheaper price, in exchange for a pledge. A much-touted success was the Pebble Watch on Kickstarter, with orders exceeding $10 million. Of course, there are thousands of other companies that don’t achieve their minimum goal, requiring all contributions to be returned.
- Donation good-cause model. This model facilitates donations to charities and creative projects, and has been around for a long time via sites such as Rockethub. No startup ownership or financial return should be expected, but contributors can enjoy the satisfaction of furthering non-profits or causes with a passion to change the world.
- Interest on debt model. In this model, often called micro-financing or peer-to-peer lending (P2P), people contribute with the intent to create a pool for all to borrow against. This model been popular in many countries for years, where banks loans are not available, via sites such as LendingClub and Kiva. The allure is the ability to get small loans easily, or excellent returns from the interest, but the risks are high.
- Startup equity model. In the U.S., only accredited investors can use crowdfunding sites such as EquityNet to buy ownership in their favorite startup. In Europe, other investors can buy equity, with platforms such as Seedrs. Equity investing is very risky, but huge returns are possible if you pick the next Facebook, but failure means your entire investment is lost.