Crowdfunding

Crowdfunding is the practice of funding a project or venture by raising small contributions from a large number of people, typically via the Internet. It allows creators, startups, nonprofits, and community initiatives to obtain capital without relying on traditional financial gatekeepers such as banks or venture capital firms. Campaigns are run on specialized platforms that connect project owners with potential backers.

There are four main types of crowdfunding. Donation-based crowdfunding involves contributions without expectation of material reward, typically used for charitable or humanitarian causes. Reward-based crowdfunding offers non-financial incentives, such as early access to a product or branded merchandise, in exchange for support. Equity crowdfunding provides backers with an ownership stake in the project or company, and is regulated as securities in many jurisdictions. Debt or loan crowdfunding (peer-to-peer lending) involves contributors providing loans and receiving interest and eventual repayment.

Most campaigns set a funding goal and a deadline, and use an online platform to collect contributions. Many platforms employ an all-or-nothing model: if the goal is not met by the deadline, funds are returned to backers. Fees are charged by platforms and by payment processors. In addition to funding, crowdfunding can serve as a test of market interest and a way to build a community around a project.

Crowdfunding emerged in the early 2000s and gained widespread attention with platforms such as Kickstarter and Indiegogo. It has since become a global phenomenon used for creative projects, product launches, tech hardware, films, and civic initiatives. Equity and debt crowdfunding are subject to securities and consumer-protection laws in many countries.