Crowdfunding is a method of collecting small contributions from a large number of people. It gained prominence after the 2008 financial crisis as an alternative to traditional financing.
There are four types of crowdfunding:
-
Donation-based: Supporters donate without expecting a return, often for charitable causes
-
Reward-based: Backers receive non-monetary rewards, like products or services, in exchange for their contributions.
-
Equity-based: Investors provide funds in return for shares in a company.
-
Lending-based: where contributors lend money with the expectation of repayment with interest.