How does crowdfunding work?

Crowdfunding raises capital entirely online from many individual investors. It can be used to fund many things, including a business idea, a research & development project, new product development or for a community or nonprofit cause.

There are various sites which are used to handle the process, some for business related funding and others for social causes.

Some crowdfunding activities fall under the Securities & Exchange Commission’s rules, so it is important for the parties on both sides of the transaction to understand the legal implications, responsibilities, and risks.