What is crowdfunding?

Crowdfunding is the practice of funding a project by raising small amounts of money from a large number of people.

Thanks to challenges in regulation, crowdfunding has become an increasingly vibrant source of capital for start-ups that may have struggled to raise capital through more traditional methods such as a small business loan from a bank, or venture capital funding.

Crowdfunding is in essence a form of crowdsourcing and relies on donations from a wide range of people. Often the sums of money donated are small, but larger donations can be made.

This practice has grown in popularity in part thanks to websites such as Kickstart, Indiegogo, and MicroVentures for equity investment.

These sites often carry out their own due diligence on start-ups in order to make sure those that donate to a company or project are not swindled out of their money.

Numerous crowdfunding sites exist and often are tailored to specific areas, so choosing the right one that fits your needs is important.