What Is Crowdfunding and Crowd Investing?

Investing is a serious question for an entrepreneur as it directly determines whether the venture is possible to implement of or not. There are various sources of funding. First, an entrepreneur can use their own capital or partially borrow from their family. Next, they can take a bank loan. People can also find a wealthy co-owner or a rich investorĀ to raise their venture. And last, business owners can refer to crowdfunding.
Crowdfunding happens when a number of small investors finance an emerging business project. If the entrepreneur wants collective financing for their business, they search for investors on social media or use crowdfunding websites. In the US, the pool of potential investors is regulated. By this, unsophisticated investors without a considerable wealth are protected from putting too much money into the venture. New businesses often fail so that small investors risk losing their money in the venture.
Having no big investors at hand, entrepreneurs can raise hundreds of thousands or millions of dollars through crowdfunding. Kickstarter and Indiegogo are the major websites that attract thousands of small investors to fund million-dollar startups. In 2015, a company that developed a cheaper alternative toApple watch got $20 million on Kickstarter. Small investors surely like to put their money into projects that look successful, but even some small and amusing ventures can receive funding from online investors.
Investors get their benefits from crowdfunding. In a reward-based project, they participate and receive a gift from the company. For example, gamers eagerly invest in new video games and get copies of these games for their participation. Equity-based crowdfunding allows investors to get an equity position in the venture, and there is no need for entrepreneurs to give all the control to capital investors.