Crowdfunding is the practice of raising small amounts of money from a large number of people, typically via the internet, to fund a project, new business venture, product launch, or worthy cause. Crowdfunding is a form of crowdsourcing and alternative finance. Crowdfunding makes use of the easy accessibility of vast networks of people through social media and crowdfunding websites to bring investors and entrepreneurs together, with the potential to increase entrepreneurship by expanding the pool of investors beyond the traditional circle of owners, relatives, and venture capitalists.
There are several types of crowdfunding, including rewards crowdfunding, equity crowdfunding, and donation-based crowdfunding. Rewards crowdfunding involves entrepreneurs pre-selling a product or service to launch a business concept without incurring debt or sacrificing equity/shares. Equity crowdfunding is the collective effort of individuals to support efforts initiated by other people or organizations through the provision of finance in the form of equity. Donation-based crowdfunding is the collective effort of individuals to help charitable causes. In donation-based crowdfunding, funds are raised for religious, social, environmental, or other purposes, and donors come together to create an online community around a common cause to help fund services and programs to combat a variety of issues including healthcare and community development.
Crowdfunding platforms are websites that enable interaction between fundraisers and the crowd, and financial pledges can be made and collected through the crowdfunding platform. Crowdfunding has become a popular method for entrepreneurs, nonprofits, artists, and individuals to raise capital and support for their projects. While crowdfunding offers an excellent opportunity for funding and community engagement, it also demands careful planning, marketing effort, and the ability to deliver on promises to maintain trust and credibility.
