What is the concept of crowdfunding?

The concept of crowdfunding involves raising small amounts of money from a large number of individuals, typically through online platforms. This method allows entrepreneurs, creators, and organizations to gather funds for their projects, initiatives, or businesses without relying on traditional financing sources like bank loans or investment from large institutions.

Crowdfunding leverages the power of community and social engagement, enabling backers to support ideas they believe in, often in exchange for rewards, equity, or other incentives. This model democratizes access to capital, allowing a diverse range of projects to be funded and providing alternatives to conventional financing routes.

In contrast, bank loans represent a more traditional and structured form of financing that typically involves rigorous credit assessments and collateral requirements. Focusing on investing in established companies excludes innovative, but high-risk startups, which crowdfunding aims to support. Likewise, direct loans from venture capitalists are usually reserved for a limited number of startups with significant growth potential, rather than the broad spectrum of small projects that crowdfunding accommodates.