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A person, group, cause or organization that raises money from a lot of people that, on an individual basis, contribute a relatively small amount of money to help achieve the goal.
A high school coach needs a new piece of equipment that costs $1,000. The coach creates a listing on a web site that is designed to assist him in these efforts (crowdfunder.com). The coach collects $1,000 from 500 people each contributing $2.
Hipster/tech speak translated to "begging for money over the internet."
I really have this great idea for an app that has the potential to make millions, but I don't want to give up any ownership of my company, don't want to hassle with securities laws, or simply can't get capital investors interested. So, I'll just "solicit donations" over the internet by crowdfunding that way I appear legitimate instead of a beggar.
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When groups of people who share common interests pool small contributions of money to achieve their common financial goals.
Heather is crowdfunding her first CD by asking her fan base, and the people in her community, to contribute 10 dollars each to the project.
My family crowdfunded our parent's 25th wedding anniversary trip to Germany.
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Crowdfunding is raising money from friends and family to fund an idea, cause or business. Donation based is the most common and Kickstarter and Indiegogo are two popular sites. Money given to campaigns on these sites is considered a donation and often there is a perk like a t shirt or your name in the credits of a movie. The most successful campaigns (millions of dollars) have typically been for companies who are offering a product (think presale) in exchange for a donation.
As a result of the 2012 JOBS Act, companies will soon be able to offer equity or debt in their company in exchange for investment money. The SEC hasn't completed the rules for this yet, so companies have to wait until they are done. This could significantly expand the capital available to entrepreneurs and will allow unaccredited investors (that's nearly all of us who are not wealthy) to invest in people and ideas that we believe in. This type of investment is very risky because of the high failure rate, thus people will be limited on the amount of money they can invest based on their net worth. Today, the biggest investment gains come from these type of early-stage investments. Once the rules are complete and start up companies can offer securities, the everyday Joe and Jane can possibly fund the next big idea like Google or AirBnB or Amazon.
To learn more about equity crowdfunding, CareerFuel has a comprehensive site created to educate entrepreneurs and would-be investors.
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