Crowdfunding
Crowdfunding raises capital by collecting smaller contributions from a large number of people, usually through an online platform.
Crowdfunding gathers money from many backers rather than a single lender or investor. It comes in a few forms. Rewards based campaigns offer a product or perk in return for a pledge, donation based campaigns ask for support with nothing given back, and equity crowdfunding lets a crowd of investors buy actual shares in the company under specific securities rules. Most campaigns run on a dedicated platform that handles payments and sets a funding window and target.
This approach can fit founders who have a compelling product story and an audience willing to rally behind it, and equity crowdfunding can open ownership to supporters who believe in the mission. The trade offs depend on the type. Rewards campaigns commit you to delivering on promises, which can be costly if demand exceeds your capacity, and equity crowdfunding means giving up ownership and taking on disclosure and reporting duties. Running a campaign also takes real marketing effort, so it rarely works as a passive source of funds.
Common questions
What is the difference between rewards and equity crowdfunding?
Rewards crowdfunding gives backers a product or perk, while equity crowdfunding sells them an ownership stake in the company under securities regulations.
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