Crowdfunding is big business. The idea of financing projects or businesses with small contributions from large numbers of people is catching on in a big way and now accounts for significant amounts of money. In 2011 alone, €1.5 billion was raised through crowdfunding for projects and businesses in need of funds.
Not only does the model provide finance but also access to a large number of people who can test and market an idea. Crowdfunding takes a number of different forms, the most successful of which has been the reward-based model where participants receive non-financial rewards in exchange for donating to a project.
The model effectively harnesses not only the contributors' desire for the reward but also the intrinsic or social motivations to back a project. Other forms of the model are, however, also growing rapidly. The most recent of these is equity crowdfunding, where individuals receive small stakes in a privately owned young business in return for investment.
Liam Collins and Yannis Pierrakis
This paper sums up the history of crowdfunding and includes examples of its different types.
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