Crowdfunding

Also called Equity Crowdfunding

Raising money from a large number of people, each contributing a small amount, online. Rewards crowdfunding pre-sells a product; equity crowdfunding sells small stakes to many retail investors.

Why it matters

Crowdfunding can validate demand and build a community of owners while raising cash, but it brings many small stakeholders and its own compliance. It fits consumer products better than most B2B startups.

For example

A hardware startup pre-sells its gadget to 4,000 backers on Kickstarter, validating demand and funding the first production run before shipping.

Go deeper

Non-Dilutive Funding for Founders Founderpath · article Where Crowdfunding fits among the non-dilutive ways to fund a startup without giving up equity. Open founderpath.com →

Related terms

Also in Starting Up

See how founders actually handle this on Raising your first round, part of the Starting Up hub.

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