Crowdfunding is a technique employed by social ventures for raising start-up/growth capital from a community of ‘believers’, willing to put money where their mouth is. The word itself was coined back in 2006 after a term of ‘crowdsourcing’, i.e. a technique employed by Wikipedia and others whereby a certain task is performed by an undefined group of people (e.g. knowledge is shared on Wikipedia by anyone who considers himself/herself to be an expert on the matter).
Crowdfunding is employed predominantly by social ventures or charities and involves attracting donations/‘investments’ as small as 5-10 USD in return for monetary or non-monetary rewards to the ‘investor’. ‘Investments’ are not a traditional acquisition of a share of business, but rather a purchase of a right to belong to a community and receive certain returns.
Monetary rewards can include revenue participation; non-monetary ones range from product samples or invitations to parties, to pure satisfaction from contributing to a socially significant cause. Most donations/‘investments’ are made online, with some done through social networking websites. Crowdfunding enterprises are not regulated by the financial services authorities and, therefore, have to be careful not to use the standard investment jargon.
by Hub Kyiv
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