Crowdfunding is a way of raising money to finance projects and businesses. It enables fundraisers to collect money from a large number of people via online platforms.
Main types of crowdfunding
The crowd lends money to a company with the understanding that the money will be repaid with interest. It is very similar to traditional borrowing from a bank, except that you borrow from lots of investors.
Sale of a stake in a business to a number of investors in return for investment. The idea is similar to how common stock is bought or sold on a stock exchange, or to a venture capital. Rewards-based crowdfunding
Individuals donate to a project or business with expectations of receiving in return a non-financial reward, such as goods or services, at a later stage in exchange of their contribution.
Individuals donate small amounts to meet the larger funding aim of a specific charitable project while receiving no financial or material return.
Profit-sharing / revenue-sharing
Businesses can share future profits or revenues with the crowd in return for funding now.
Individuals invest in a debt security issued by the company, such as a bond.
Offer businesses the opportunity to combine elements of more than one crowdfunding type