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Crowdfunding is a method of raising capital in small amounts from a large group of people using the Internet and social media. Unlike funds from venture capitalists or angel investors, the money raised through crowdfunding doesn’t necessarily buy the lender a share, and there is no guarantee that it will be repaid if the venture is successful. Instead, individuals are asked to make microinvestments or donations to causes and ventures they believe in, thus allowing the work to be completed.
Crowdfunding is also known as crowd source capital.
Crowdfunding is becoming a common financing method for citizen journalists, social entrepreneurs, activists, open-source software projects, artists, charities and so on. Theoretically, it walks the line between investing and donating, but the amounts are generally small enough ($1-$20) that few people expect to see a return from money given to crowdfunded projects. Crowdfunded projects usually take the form of social improvement projects or not-for-profit activities, but some crowdfunding sites are building a framework, where crowdfunding of for-profit ventures can come with an equity stake with potential payoff if the business succeeds.