About Crowdfunding

Simply, crowdfunding is where a group of people use small dollar donations to fund an idea. Crowdfunding was created to allow businesses to raise money for their company, project, product, or other idea through the use of a web portal. Companies can pitch their company, set a funding goal amount, and leverage the power of the Internet to raise money through a large number of people (aka, the ‘crowd’). With crowdfunding in the past, companies were only to provide rewards or gifts in exchange for certain funding amounts. Now with the birth of the JOBS Act, companies will be able to provide an equity ownership in their company for similar financial investments.

History of Crowdfunding

Crowdfunding can be traced as far back as the 1700s. An idea we now call Microfinancing, was started by Jonathan Swift in Ireland. Here, Swift began a fund that gave loans to low-income families throughout Ireland.

Modern microfinancing can be traced back to Dr. Mohammad Yunus in 1976. Similar to Swift, Yunus gave low-income individuals the chance at getting a loan from a bank. He began by loaning $27 to 42 women in Bangladesh where Yunus had help from his graduate students. These loans were used by the women to start their own businesses. Seven years and thousands of success stories later, Yunus loan program became Grameen Bank. Those thousands of stories have since turned into over 8 million borrowers that are able to flourish with the given resources. These revolutionary actions brought Yunus and Grameen Bank a Nobel Peace Prize in 2006.

More recently, crowdfunding has come to be a way for many people to input a small amount in order for a project or business to reach their fundraising goal and become successful. Based on the amount given by an individual, a certain reward would be sent to the person upon campaign completion. Many sites require campaigns to be fully funded before funds would change hands; however others have funds change hands once the campaign ends regardless if the project’s goal was met.