« Back to Glossary Index

Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture. This type of funding 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.

Crowdfunding has created the opportunity for entrepreneurs. To raise hundreds of thousands or millions of dollars from anyone with money to invest. This way of funding also provides a forum to anyone with an idea. To pitch it in front of waiting investors. Crowdfunding websites such as Kickstarter, Indiegogo, and GoFundMe attract hundreds of thousands of people. Hoping to create, or support, the next big thing.

Crowdfunding is the use of small amounts of capital. Basically from a large number of individuals to finance a new business venture. Depending on the type of crowdfunding, investors either donate money altruistically. Or get rewards such as equity in the company that raised the money.

Furthermore, many such projects are rewards-based; investors may get to participate in the launch of a new product or receive a gift for their investment. For instance, the maker of a new soap made out of bacon fat may send a free bar to each of its investors. Video games are a popular crowdfunding investment for gamers, who often receive advance copies of the game as a reward.

Equity-based crowdfunding is growing in popularity because it allows startup companies to raise money without giving up control to venture capital investors. In some cases, it also offers investors the opportunity to earn an equity position in the venture. In the United States, the Securities and Exchange Commission (SEC) regulates equity-based crowdfunding.

To learn more about funding your own start-up, our sister company, Alator Capital, will be able to help you.

« Back to Glossary Index