Crowdfunding is a financing method that involves funding a project with relatively modest contributions from a large group of individuals, rather than seeking substantial sums from a small number of investors. The funding campaign and transactions are typically conducted online through dedicated crowdfunding sites, often in conjunction with social networkingsites. Depending on the project, campaign contributors may be essentially making donations, investing for a potential future return on investment (ROI), or prepaying for a product or service.
Similarly to crowdsourcing, the concept from which it developed, crowdfunding's success relies upon the ability to canvass a sufficiently large group of potential contributors. The idea is the same as that behind many fundraising campaigns: convincing enough people to contribute to reach a target figure.
Crowdfunding sites are sometimes referred to as platforms because they provide a venue for all aspects of a campaign, such as creation of the public interface, campaign and project tracking, a payment mechanism and disbursement of funds.
In the United States, the Jumpstart Our Business Startups (JOBS) Act, signed into effect in April 2012, includes crowdfunding provisions designed to make it easier for entrepreneurs to raise funds and get new businesses established before they have to deal with compliance requirements.
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