What is Crowdfunding?
Crowdfunding is the raising of funds through the collection of small contributions from the general public (known as the crowd) using the Internet and social media. 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.
The key to crowdfunding in the present context is its inextricable link to online social networking and its ability to harness the power of online communities in order to extend a project’s promotion and financing opportunities. The non-profit sector was the first to successfully employ crowdfunding in its present online form.
More recently, crowdfunding is becoming an increasingly common form of raising funds in the technology and media industries; including music, film and video games. Traditionally, crowdfunding is used to raise money to fund the development of a well-defined, singular project. The new form of crowdsourced private financing has lowered the barriers to entry not only for financing projects, but also for the average citizen to play the role of investor. Crowdfunding also has a unique dual function of providing both private financing and generating publicity and attention for a project.
- In April 2012, Massolution/ Crowdsourcing LLC released the first-ever profile of the global crowdfunding industry in its Crowdfunding Industry Report.
- In the last six years have seen unprecedented growth in crowdfunding, with the growth in the number of crowdfunding platforms reaching 54% in 2011 and set to reach an estimated 60% in 2012.
- According to the same study, north America and Europe are the two most active markets for crowdfunding, with north America currently representing the largest market in terms of the volume of funds raised, at a total of $837 million (USD) for 2011.
- By contrast, of the world’s 1,187,000 total successful crowdfunding campaigns, the majority originated from Europe (654,000), exceeding the number originating in North America (532,000).
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