Crowdfunding is a way of raising finance by asking a large number of people each for a small amount of money. Until recently, financing a business, project or venture involved asking a few people for large sums of money. Crowdfunding switches this idea around, using the internet to talk to thousands – if not millions – of potential funders.
What is especially important about crowdfunding as far as investors are concerned is that the use of crowdfunding platforms allows direct investment. While traditional investment requires money to be routed through large financial structures as intermediaries that charge a fee on transactions, crowdfunding avoids these fees.