This post was originally written by Dylan Rochon, 2015 Foley & Lardner LLP Startup Connector.
The term “crowdfunding” is closely associated with websites such as Kickstarter.com and GoFundMe.com. These sites provide a platform for startup companies to attract attention and funding. They provide an avenue for a wider group of investors to help fund or completely fund entrepreneurial startup projects. They have become popular among entrepreneurs, allowing them to “test the waters” and launch ideas that may otherwise not have been launched. In 2013, the crowdfunding economy reached $5.1B, more than three times larger than it was in 2011. Crowdfunding is said to be in startup mode itself and is expected to continue rapid expansion.
There are essentially four types of crowdfunding, and each one has its own pros and cons.