Crowdfunding is a way to get multiple small investors to fund a new business or project. Crowdfunding uses social media to reach a large public, with some websites specialising in connecting investors with entrepreneurs. Crowdfunding also aims to provide entrepreneurship by opening up capital to people other than the family or friendship circles of founders and traditional venture capitalists.
In many jurisdictions, regulations exist to protect non-specialised or non-wealthy capital providers from putting all their savings at risk. A start-up is a risky business, and investors run a high risk of losing the funds invested.
Crowdfunding allows entrepreneurs to raise significant funds from people with money to invest. It is also a way of presenting to investors ideas for goods or products that a company can bring to market.
Crowdfunding is used by entrepreneurs who are looking to bring a product or service to market, but also by people who are in some kind of emergency due to natural or personal disasters.