New to this crowdfunding thing and not sure where to start? You’ve come to the perfect place! Keep reading below…

What is crowdfunding?

Crowdfunding is the act of funding a project or a company by raising small amounts money from a large amount of people. Since the internet is the most efficient way to connect people across the world, it has naturally turned into an environment that has let crowdfunding explode in recent years. But not all crowdfunding is the same. We here at Krowdfund break it out into four different categories:

Rewards Crowdfunding:

This is the Kickstarter model of crowdfunding where inventors, artists, and other creative types look to raise money for a specific project from people who want to see the idea actually come to life. In return for their monetary support, the project’s creator promises to deliver some type of reward, which oftentimes is the actual product that the money is going to help create (such as a new gadget or digital download of a yet-to-be-recorded album). For this reason, many people refer to these types of crowdfunding campaigns as “pre-sales.”

Cause-Based / Charitable Crowdfunding:

If doing good makes you feel good, this type of crowdfunding is right up your alley. Used by both non-profits and individuals, cause-based crowdfunding is normally used when a specific need is identified but traditional fundraising channels have failed. Some example include helping out on medical bills for someone who can’t afford them or funding a children’s summer camp for children that may be in jeopardy due to local budget cuts.

Equity Crowdfunding:

Some times people want to see a return on their money. “It takes money to make money” as they say. While putting that money at risk in the stock market looking for such a return is fine and dandy in the eyes of the federal government, investing in small privately held businesses has been against the law for most of the general public since the 1930’s. Yes, you read that correctly. the 1930’s.

Well, the times they are a changing! The JOBS Act, approved in 2012, will soon allow you to invest in startups and other small businesses with as little as $100. Entrepreneurs that have been shut out from the financial markets will soon be able to raise money for their businesses from their customers, friends, or anybody that believes they have what it takes to turn a nickel into a dime. It has been over three years since the JOBS Act was approved by Congress and the SEC (Securities and Exchange Commission) has yet finalize the rules that will regulate this new industry. But they are coming soon. And we here at Krowdfund will keep you updated every step of the way.

Peer-to-Peer Lending:

While purchasing actual shares of a private business may still be illegal, receiving interest on a loan made to one is not. Peer-to-peer lending allows tens, hundreds, or even thousands of people to lend small chunks of money to an individual or business and receive regular payments of principal plus interest on that loan until it is paid back. This industry has been experiencing incredible growth in recent years, with sites like Prosper and Lending Club leading the way. We’ll be posting some more in depth commentary on P2P lending soon, so stay tuned.

So….what is and why is it spelled with a K?

As crowdfunding continues to grow, more and more platforms and creators are vying for the attention of funders. What has resulted is an ecosystem filled with noise. Since we already love browsing, discovering, and analyzing crowdfunding campaigns, we thought it would be a great idea to publish our favorites to the crowd. When we tried to register to start publishing our crowdfunding picks, we soon discovered it was already taken by domain squatters. So we went a little bohemian and threw a K in there just to see what happened and voila, problem solved.

To date, we have mainly focused on curating the best rewards and cause based crowdfunding campaigns from across the web, but we definitely plan on including equity and debt picks and analysis on the site in the near future. Until then, we’ll keep waiting on the SEC to update those 80 year old rules……

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