What is Crowd Funding?

The growth of online businesses is vast and everything from retail to fashion is online for sale.  The investment community is no different and "Crowd Funding" has become a term of art to aspiring entreprenuers looking to raise money.  Wiki describes crowd funding:
Crowd funding or crowdfunding (alternately crowd financing, equity crowdfunding, or hyper funding) describes the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations. Crowdfunding is used in support of a wide variety of activities, including disaster relief, citizen journalism, support of artists by fans, political campaigns, startup company funding, motion picture promotion, free software development, inventions development, scientific research, and civic projects.
While crowd funding can be very lucrative, it can also be a total bust without the proper marketing.  Many parties are under the impression that you just list a company on a crowfunding site and loads of money will come in for your idea.  The truth is, crowd funding, is a sort of donation for a project.  Many entrepreneurs are relating crowd funding to equity investments, which is something the S.E.C. against.

Crowdfunding can also refer to the funding of a company by selling small amounts of equity to many investors. This form of crowdfunding has recently received attention from policymakers in the United States with direct mention in the JOBS Act; legislation that allows for a wider pool of small investors with fewer restrictions. While the JOBS Act awaits implementation, hybrid models, such as Mosaic Inc., are using existing securities laws to enable the public in approved states to invest directly in clean energy projects as part of a crowd.

Crowdfunding has its origins in the concept of crowdsourcing, which is the broader concept of an individual reaching a goal by receiving and leveraging small contributions from many parties. Crowdfunding is the application of this concept to the collection of funds through small contributions from many parties in order to finance a particular project or venture.
Crowdfunding models involve a variety of participants. They include the people or organizations that propose the ideas and/or projects to be funded, and the crowd of people who support the proposals. Crowdfunding is then supported by an organization (the "platform") which brings together the project initiator and the crowd.
Many laws are mixed on crowdfunding but the sites keep going up.  Crowd Funding Scripts for websites are easily found and can be up and running within hours.  Success stories and the markets largest players are: The United States based company ArtistShare (2000/2001) is documented as being the first crowdfunding website for music followed later by sites such as Pledgie (2006), Sellaband (2006), IndieGoGo (2008), Kickstarter (2009), RocketHub (2009), Fundly (2009), GoFundMe (2010), Appsplit (2010), Microventures (2010) and Fundageek (2011).

PushYourRank's Take: If you are a small business looking to raise money, crowdfunding may not be for you.  Crowdfunding historically has made the most progress for charities, documentaries (films), and the like; but this is not to say that you will not be a success.  The issue lies in that crowdfunding in essence is a donation from someone to your venture.  The donation should not be considered an investment.  Thus small businesses or websites looking to raise money for their projects can not offer equity in there venture.  Our solution: offer advertising space on your website or website model in exchange for donations.  And make sure to have a strategy to raise money before you list yourself on any crowd-funding site.  Too many parties make the mistake of not setting up a plan, and just assume that the crowd-funding site has ample traffic to raise money for their campaigns.  You should build the crowd to raise funds from before even considering being on a site.

Hope this was helpful,

The PushYourRank Team
Author: Nicholas Coriano

About The Author: Nicholas Coriano is an Entrepreneur, Web Developer, Social Media Marketer, SEO Consultant and the founder of this blog and The NewYorkWebsiteDesignCenter.com.  While developing websites for his own businesses and marketing his entrepreneurial ventures online, he began blogging useful tips and "how-to" articles on PushYourRank.com for reference purposes.  To retain Nicholas for help with your Website, Social Media, SEO or other online/technology needs, email PushYourRank@Gmail.com

About PushYourRank.com: PushYourRank.com (the Blog) is a blog that helps small businesses, start-ups, developers, amateurs website builders, bloggers and entrepreneurs develop their websites, their social media presence, their search engine optimization techniques and more ....online.  The Blog publishes articles about Ecommerce, Email Marketing and How To Make Money Online...as well as any topic that pertains to the Internet or Online.  If you need help developing a website, SEO or Social Media outsourcing, see NewYorkWebsiteDesignCenter.com, if you would like to advertise or have us publish an article on a certain subject, please email us at PushYourRank@Gmail.com