Crowdfunding is a method of raising capital through the collective effort of friends, family, customers, individual investors, and others. It leverages networks for greater reach and exposure by utilizing online platforms to bring investors and entrepreneurs together. Crowdfunding can be used to fund various initiatives, from creative projects like films or albums to products, businesses, or personal needs.
There are different types of crowdfunding, such as equity-based, reward-based, donation-based, and debt-based (or peer-to-peer lending). Each type serves different purposes and targets different audiences, with varying levels of regulation, structure, and financial return or incentives for the backers.
In a typical crowdfunding campaign, an individual or group presents a project or idea to the public, sets a funding goal and deadline, and offers rewards or incentives to backers at different contribution levels. If the campaign reaches or exceeds its funding goal, the funds are collected and used to carry out the project. If the goal is not met, the funds may be returned to the backers, depending on the platform’s policies and the campaign’s structure.