According to Wikipedia, the definition of crowdfunding can be either:
- The collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations.
- The funding of a company by selling small amounts of equity to many investors.
According to many small businesses, crowdfunding is the new alternative in business financing, leaving the concept of a traditional bank loan in the dust.
ONE IDEA, MANY INVESTORS
Instead of getting a traditional bank loan where the bank is the only "investor" in the business, the world of crowdfunding brings many potential investors into the business. Each of those investors has a much smaller share of the investment.
Here is an article that describes some crowdfunding success stories so you can better understand how the concept works with some real life examples.
Granted, this concept isn't for all businesses - there are simply some that don't have the products or services to attract these types of investments. However, as the article describes, crowdfunding can be a game changer for others.
Like many other things relating to business, this concept is not without its' risks, so be sure to understand them carefully before taking on your own funding project.
ADDITIONAL RESOURCES ON CROWDFUNDING:
- Crowdfund Capital Advisors
- Comparison of crowdfunding web sites (this list is not all inclusive by any stretch)
- StartingTrends crowdfunding resources page
COULD THIS BE YOU?
What's your take on this new approach to financing small businesses? Have you done a crowdfunding project yourself or know of a business that has?
Feel free to share your thoughts and comments in the box below!