What exactly is it anyway?
Crowdfunding (also known as hyper funding and micro financing) is where many small investors pool their resources, enjoying the same or similar results of much larger investors, private equity and large scale fundraising.
This concept allows small entrepreneurs throughout the world the ability to raise funds and compete more effectively for fewer fundraising dollars. Disaster relief, political and charitable fundraising are the most common forms of crowdfunding.
It has become a global online movement that has created steam for a common good.
This movement provides a sense of community and gets people engaged while creating awareness of causes they might not have known about otherwise.
This type of dollar networking is still a relatively new concept and has a slow evolving regulatory framework. Individual investors should tread lightly because returns are unpredictable and fraudsters are sure to be standing by waiting to prey on the unsuspecting.
Crowdfunding may be a more effective way of raising early stage capital for innovators looking to gain support financially from banks or angel investors for smaller projects.
Crowdfunding has powerful appeal for successful young millennials with money to spare.
The idea of participating in global initiatives provides great appeal to many through marketing efforts and political activism. Small investors can pool their funds with other like-minded individuals and become part of a movement, through crowd funding.
Crowdfunding has really picked up steam in support of the arts.
The artist can get the funding and exposure they need but remain in control of the art being produced without corporate influence. It allows the fans to vote with their wallets and share their voice about what they like.
Some financial talking heads see crowdfunding as a threat to traditional markets.
Crowdfunding sites are creating quite a stir among traditional investment practices. With just a few clicks of the mouse you can find numerous crowdfunding sites, each with a different spin.
One unique example is a nonprofit that raised money through a social crowdfunding site, securing $100,000 to launch the Do Good Bus, showing people how and where to volunteer within their community. Non-profits throughout the country are using the internet to raise money for social causes having a positive impact on people around the world.
Crowdfunding has become a powerful tool for those seeking to raise awareness and drive social change. This is a concept that could have staying power. Just look at the success of crowd voting on shows like American Idol. Universities such as UNLV are even getting into the action, offering training courses and seminars. Even the Donald is getting in on the crowdfunding action.
This is not an endorsement of this type of funding. Being aware of options is always a smart Financial Strategy for Life.