What Is Crowdfunding?

Need money? Consider getting other people to help fund you

Group gathered around laptop
Jacob Ammentorp Lund/iStock  

Crowdfunding, also known as crowdsourcing, is a term that's used a lot these days. Like it suggests, crowdfunding is all about gathering together information, services or funds from the general public – or in other words, a large group or "crowd" of people – who are interested in actively participating to support or implement an idea. Generally, this is the public, but a business might also utilize crowdfunding techniques to develop an internal application.

Why Crowdfund?

It's difficult to initiate and implement a project on your own or even with just a small team. The more people you can get involved in your idea or project, the more of an impact you can have if you work together to make it happen.

If your idea or project is a good one, people will want to get in on it. That's part of what makes crowdfunding so great. The best ideas naturally draw more people in, so when it comes to crowdfunding, putting something into action always relies on whether the public wants it or not.

Examples of Crowdfunding

Believe it or not, crowdfunding has been around long before the term was invented. We've seen it used to provide evidence of Bigfoot or UFOs or the Loch Ness monster in contests that offer a reward for providing proof. And we've seen it in open source development projects where the crowd is key to the development process.

With the growing interaction among people on the social side of the web, the soaring popularity of the crowdfunding model is not unexpected. Projects such as ​​Wikipedia provide a great example of crowdfunding on a large scale, but crowdfunding doesn't have to be so grandiose. A T-shirt manufacturer opening up a suggestion box for t-shirt slogans is also utilizing the idea of crowdfunding.

Popular Online Platforms for Finding Support For Your Idea

Kickstarter is another hugely popular crowdfunding service that most web users have heard about, which allows people to set up their own project proposal page and set a crowdfunding target amount. (Crowdfunding and crowdsourcing are terms that are often used interchangeably.) Some of the strangest ideas have been funded, so never think your idea is too weird.

If the project hits its target in funding, it gets sent to production but, if not, everyone who pledged funds to support the project gets their money back. You can learn more about Kickstarter here, including how you can kick off your own project if you have an idea that you think the public might really love.

Indiegogo is another popular crowdfunding or crowdfunding site that's a bit more flexible than Kickstarter given that people can use it for almost any idea that doesn't necessarily have to be providing a product or a service. It also allows users to keep the funds they raise even if they don't hit their target. Each service has its own good points; compare them to see which one meets your needs.