It seems that everyone is talking about crowdfunding these days. Some articles have suggested that p2p lending is evolving into crowdfunding and that is the way of the future. I have also started to see a new term emerge: crowdinvesting, which is a new kind of crowdfunding. So, I decided it was time to tease these concepts out to see how they relate and where they are heading.

What is Crowdfunding?

Let’s start with crowdfunding. Simply put crowdfunding is just the pooling of money by individuals to support the efforts of a person or organization. The leader in this industry is Kickstarter, which really began as a way for artists to fund film and music projects, but has morphed now into a platform for any business to raise money. My local coffee shop in Denver just raised $15,000 for improvements on Kickstarter and I know several other businesses doing a similar thing.

Typically on Kickstarter and other similar crowdfunding platforms businesses offer rewards to entice people to fund their project. There are many different levels, usually starting pretty low ($10 or even less) and at each level the reward gets better. The project is on the platform for 30 days and it doesn’t end when the project is funded, it keeps going until the 30 days are up. So, occasionally when an idea goes viral you end up with a company asking for $100,000 and receiving over $10 million in funding like this new watch company who completed a wildly successful Kickstarter campaign last month. [Read more…]