crowdfunding
Raising money from a large number of people, typically via the internet, to fund a project or business.
Example
“The startup raised $500,000 through a crowdfunding campaign on Kickstarter.”
Memory Tip
CROWD-funding — a CROWD of people each chips in a little money to fund something big.
Why It Matters
Crowdfunding allows everyday people to invest in early-stage companies and creative projects without needing a large amount of capital upfront. Understanding this option helps you diversify your investment portfolio and support ventures that align with your values while potentially earning returns or receiving rewards.
Common Misconception
Many people believe that all crowdfunding investments are guaranteed to succeed or that they will definitely receive their promised rewards or returns. In reality, most crowdfunded projects fail to deliver, and equity crowdfunding carries significant risk with many startups ultimately going out of business.
In Practice
A tech startup seeking to develop a new smartwatch launches a campaign on a crowdfunding platform asking for 500,000 dollars. Individual investors contribute between 50 and 5,000 dollars each from thousands of supporters, reaching the funding goal in three weeks. In return, early backers receive the smartwatch at a discounted price once production begins, typically several months later.
Etymology
Crowd (many people) + funding — funding sourced from a crowd of small investors.
Common Misspellings
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Related Terms
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See Also
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