What Is Crowdfunding?

Crowdfunding involves raising small amounts of money from a large number of individuals to finance a new business venture. It leverages the wide reach of Social Media and crowdfunding websites to connect investors and entrepreneurs, potentially increasing entrepreneurship by expanding the pool of investors beyond the traditional circle of owners, relatives.

The 2008 financial crisis led to the rise of crowdfunding. As banks enforced stricter lending policies post-recession, small businesses struggled to secure credit, prompting many to seek alternative funding methods. In 2023, the global crowdfunding market volume was estimated at $1.17 billion, showing a slight increase from previous years. According to Statista, the transaction value of the global crowdfunding sector is expected to grow by 1.48% annually from 2024 to 2028, reaching a market volume of $1.27 billion by 2028

How Crowdfunding Works

Raising Capital is key to any company's growth. Larger, established corporations often find it easier to secure investments or additional debt from lenders. However, smaller companies and startups often face significant challenges in this area. This is where Crowdfunding prove .

Crowdfunding has allowed  to raise substantial amounts of money from a wide pool of investors. For example, one humorous Kickstarter project involved an individual seeking to create a new potato salad recipe with a modest goal of $10, but ended up raising over $55,000 from 6,911 backers. Investors can choose from numerous projects and invest as little as $10. Crowdfunding sites typically earn revenue by taking a percentage of the funds raised.