How does crowdfunding work?
There are three main types of crowdfunding: peer-to-peer lending, rewards and donation crowdfunding, and equity crowdfunding. The first type offers the fundraiser to secure a loan without using a financial institution. The second is purely a donation strategy, though donors often get discounts on goods produced by the project. Equity fundraising enables small businesses to generate capital directly from investors without an initial public offering.
Kickstarter is a large crowdfunding platform focused on donation crowdfunding. Most projects are not successfully funded, meaning that no money changes hands. However, those that are successful can raise a significant amount of money, with a few hundred projects raising over a million dollars. This shows that there is a demand for Kickstarter’s service, and this demand for crowdfunding is likely to increase in the coming years.