By: Skip Sanzeri
Crowdfunding is a new form of financing which enables entities, projects or companies to raise capital from unaccredited and accredited individuals. Crowdfunding may likely surpass VC funding in total dollars this year (estimated $35B).
There are 3 types of crowdfunding programs: rewards crowdfunding, equity crowdfunding and debt-based crowdfunding (although at the moment it seems like debt-based crowdfunding is more for consumers than businesses, but that could change). For an idea of what types of companies or projects can be crowdfunded click here.
Rewards crowdfunding allows companies to raise capital to push the company forward without incurring debt or giving up equity ownership in the company. Equity crowdfunding provides ownership to investors and is generally used for early-stage investment.
Crowdfunding was 1st termed by Michael Sullivan in August 2006, however crowdfunding has really come on the scene since about 2010. According to Wikipedia, crowdfunding generated $1.47 billion in 2011 and grew to $5.1 billion in 2013. Additionally, according to the crowdfunding center in a report published in May 2014, during the month of March 2014, more than $60,000 was raised per hour globally via crowdfunding initiatives. Crowdfunding is quickly becoming a viable way of raising capital.
There are currently over 500 different crowdfunding platforms.
If you would like more information on crowdfunding or help running professional crowdfunding campaigns please click here.