Crowdfunding is a financing solution that uses a collection of contributions from multiple investors or financers in order to fund a specific project or start-up. A key characteristic of this method is that it uses an internet platform to gather the needed capital.
Investors who open a crowdfunding company in Liechtenstein can implement the strategy by following a number of business models. The increasing appeal of this financing method is making it more interesting for investors to open and support the platforms used for this type of activity.
Our team of lawyers in Liechtenstein specialize in opening crowdfunding companies and can assist investors who are interested in developing this type of project financing platform. They can help with essential information on relevant matters such as the control and the regulations for this activity.
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Types of crowdfunding models
Crowdfunding strategies can be implemented by following a set of different models. A platform developed by an investor in Liechtenstein that offers these types of financing options can adjust the model according to the project that is being funded or according to the needs of the project initiators. Below, our attorneys in Liechtenstein who specialize in company formation describe a number of these business models:
- Investment-based crowdfunding: the investors are allowed to invest either directly or indirectly in the projects; for example, the project initiators can offer shared in the business to those investors who offer to fund the start-up.
- Lending-based crowdfunding: for this type of funding, the company or start-up asking for the investment will receive the capital from the investors in the form of loan agreements.
- Donation-based crowdfunding: the investors donate an amount for innovative ideas; according to the wishes of the project initiators, these can be pre-established amounts or free amounts, as much as the donor wishes to grant to the project.
- Reward-based crowdfunding: the investors are promised services that will be related to the project (or in some cases, they can be unrelated) according to their contribution; the value of the reward does not have to correspond directly to the value of the investment.
Some crowdfunding models will follow these patterns accordingly, however, hybrid models have been known to work in certain cases. This is a simplified manner in which many types of entrepreneurs can access a pool of capital, however, it is advisable to seek proper counseling on the crowdfunding model that works best in a particular case. Companies in Liechtenstein that offer crowdfunding services can also offer financial counseling for entrepreneurs; this is an issue that can be taken into consideration by those willing to open a crowdfunding company in Liechtenstein.
Starting a crowdfunding business
Companies that offer crowdfunding services in Liechtenstein can provide services both for the project management and for the internet platform. This will include two distinct issues and the company will have to develop the platform (in such a way that it will allow for easy access and usage, contributing to the attractiveness of the crowdfunding project). Apart from investing in the design and functionality of the crowdfunding platform, a company in Liechtenstein that manages these types of financing activities will need to select be in charge of the projects that are presented for the purpose of being represented by the company’s platform. The crowdfunder will derive part of its profits from the success of the project which may include free samples of the product, profit sharing as well as exploitation rights. These are to be established in the agreement with the project owner and the project producer.
Some of the opportunities that come with crowdfunding include a simplified manner of accessing capital, reduced costs for engaging in other funding options, easy access to international funders as well an associated benefit for the investors: if the minimum project target amount is not reached, investors can be repaid (the contribution cannot be used for financing other projects). All of these characteristics make crowdfunding a preferred method of raising capital for many startups in Liechtenstein and in many other countries.
By basing their crowdfunding business in Liechtenstein, investors have easy access to a developed financial market and can easily access the surrounding markets in Europe.
Investors who wish to open a business in the alternative financing sector can contact our law firm in Liechtenstein for complete services related to the processes needed to open a company in Liechtenstein.