The term “crowdfunding” generally refers to raising money online from a large group of people. Crowdfunding sites act as intermediaries, connecting investors with entrepreneurs who are seeking to raise capital. Unlike traditional venture capitalists or angel investors, virtually anyone can be a crowdfunder; individuals can invest as little as $10, depending on the crowdfunding platform.

Crowdfunding allows entrepreneurs to develop their projects and businesses with contributions from family, friends, customers, and members of the public. It also provides a platform for travelers, artists, and other entrepreneurs to raise money for their ideas. Crowdfunding can also be used for personal causes such as medical bills or emergency funds.

Equity-based crowdfunding, or “crowd investing”, is becoming increasingly popular. Rather than receiving donations, individuals or companies receive investments and offer equity (shares) in return. This type of crowdfunding is regulated by the U.S. Securities and Exchange Commission (SEC) and investors are required to be accredited and to meet certain criteria as outlined by the SEC.

Aside from stipulated regulations, the main challenges of crowdfunding lie in marketing and promotion. With so many crowdfunding platforms in existence, campaigns must be strategically marketed and target potential investors in order to draw attention and money.

In the United States, some of the most popular crowdfunding sites include Kickstarter, Indiegogo, and GoFundMe. Traditional crowdfunding sites such as Kickstarter and Indiegogo generate revenue from a percentage of the funds raised. For example, a 5% fee is taken on Kickstarter and a 3-5% fee is taken on Indiegogo. Both Kickstarter and Indiegogo enable users to track the progress of their campaigns in real time.

Crowdfunding has opened up an entirely new way of raising capital and launched numerous successful businesses, products and projects. With the rise of this new method of funding, the industry is growing steadily and continues to be a viable option for capital-seeking entrepreneurs.