What Is Crowdfunding?

Crowdfunding refers to fundraising in which you can raise funding from anyone and not just accredited investors.

Typically, these investors fund early-stage companies in various ways.

Here’s a list of the different types of crowdfunding:

1. Equity-based crowdfunding — the investor receives an ownership stake in the company.
2. Reward-based crowdfunding — the investor receives a product or a reward in exchange for their funding.
3. Peer-to-peer lending — the investor receives a debt stake in a company for their funding.
4. Inventory funding — the investor funds the build of a product and places it on consignment with the producer. When sold, the investor receives a portion of the revenue.  

A startup can use crowdfunding to find investors for all of these types of crowdfunding.

Crowdfunding allows startups to raise capital from the broader market and structures the raise so it fits the needs of the company.

It is often called community funding, as the startup reaches out to its own community to find funding.

Investors often invest in smaller amounts.

Given the large number of potential investors in crowdfunding, a startup can raise substantial amounts of funding.

Crowdfunding gives more startups the opportunity to raise funding and more investors the ability to participate.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

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Disclaimer:
Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.