The venture crowd: crowdfunding equity investments into business

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 rewardÔÇôbased model where participants receive nonÔÇôfinancial rewards in exchange for donating to a project. The model effectively harnesses not only the contributorsÔÇÖ 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.