Crowdfunding means financing a product, idea, or venture using small amounts of money raised from the “crowd,” or members of the public. Crowdfunding is typically associated with a large number of individual investors or donors.
Crowdfunding initially started when entrepreneurs or organizations would turn to the crowd to raise funds for projects needing funding.
Funding would come in the form of donations, though platforms would occasionally offer rewards for different donation levels. Kickstarter, Indiegogo, and Tilt are all examples of donation- and rewards-based crowdfunding platforms.
Regulatory changes since the passage of the JOBS Act have allowed equity crowdfunding to emerge as an alternative to donation-based crowdfunding and a way for investors to earn equity in exchange for providing funding for a project.
CircleUp and FundersClub were two of the first general equity crowdfunding platforms, allowing users to invest in companies. Fundrise was the first company in the United States to offer equity crowdfunding for real estate.
All investment opportunities open for public equity crowdfunding must first be filed with the Securities and Exchange Commission.