Crowdfunding is the practice of raising small amounts of money from a large number of people to support a specific project. A crowdfunding campaign is usually conducted through the internet. People spread the idea of funding a project to their friends, relatives, and colleagues through such social media as social networking websites. An individual can make a pledge or transfer money electronically using a debit or credit card for payment or by using an internet pay service such as PayPal.
A person may choose to donate money to a cause through crowdfunding for a number of reasons. Charity-oriented crowdfunding sites may feature campaigns to help people who have suffered from natural disasters. Some of the most successful crowdfunding projects in this category include raising money for victims of an earthquake, flood, or hurricane. Other typical crowdfunded projects may include those that result in making a film, producing a recording, staging a theatrical event, or supporting a political campaign. Equity crowdfunding allows owners of new businesses to raise money from small investors. Special regulations governing this process took effect in the United States in 2016. Sometimes people make individual appeals for financial support for such personal causes as educational pursuits, celebrations and graduations, and sports, or for such life events as accidents, illnesses, and other personal tragedies.
The origin of the term crowdfunding is unclear. It is believed that the first person to use the term was Michael Sullivan. Sullivan created an early crowdfunding site called “fundavlog” in 2006. In 2009, a site called “Kickstarter” was launched. It became so successful that other crowdfunding sites soon followed. In addition to Kickstarter, some of the most popular sites include Fundly, GoFundMe, Indiegogo, and YouCaring. Sites may specialize in a particular type of crowdfunding for a particular purpose.
Today, crowdfunding has become a successful financial model for donating to causes. This has prompted interest in determining whether crowdfunding can be used to raise money for such large-scale projects as housing developments or new schools. Crowdfunding is also becoming a popular form of fund-raising for projects in developing countries.
