Crowdfunding
Definition
The practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet.
Deep Dive
Crowdfunding is an innovative method of raising capital for projects, businesses, or causes by soliciting small contributions from a large number of individuals, typically facilitated through online platforms. This democratic approach to financing bypasses traditional funding avenues like banks or venture capitalists, allowing entrepreneurs, artists, and innovators to present their ideas directly to a global audience. There are several models, including reward-based crowdfunding (backers receive a product or perk), equity crowdfunding (backers receive a share in the company), debt crowdfunding (backers receive repayment with interest), and donation-based crowdfunding (backers contribute out of goodwill).
Examples & Use Cases
- 1A startup raising capital on Kickstarter to fund the production of a new smart gadget, offering early bird discounts as rewards
- 2An independent film director securing funds for their project through Indiegogo by offering special screenings and merchandise
- 3A small business offering equity shares to individual investors through a platform like SeedInvest.