Crowdfunding is a method of raising capital by collecting small amounts of money from a large number of people, typically through online platforms. In the investment context, equity crowdfunding allows investors to buy shares in startups or small businesses.
Platforms like Kickstarter, Indiegogo, and equity crowdfunding sites enable entrepreneurs to reach investors directly. For example, a startup might offer equity to 1,000 investors who each contribute $100, raising $100,000 in total.
While crowdfunding democratizes access to investment opportunities, it carries significant risk. Many startups fail, and crowdfunded investments are often illiquid. Investors should thoroughly research any crowdfunding opportunity before committing funds.