CROWDFUNDING. You’ve heard it talked about but what is it and how risky is it?

Wikipedia lists crowdfunding as: “the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet”. I think that pretty much sums it up.

Sites such as crowdfunder.co.uk allow individuals and businesses who need funding to advertise a cause and display the amount they require. The public are then able to pledge money to the cause if they like the look of it. On the whole pledges are small meaning anyone can invest and if enough people do, the idea can move forward.

Since 2008 banks have been handing out less money and been far more stringent in their lending criteria. Crowdfunding has to some degree filled the gap and become a viable alternative for smaller ventures. Kickstarter.com was an early US pioneer in the market and since launching they have reportedly received over $1billion in pledges for some 135,000 projects. The tech company behind 3D gaming headset Oculus Rift launched on Kickstarter and ultimately was bought out by facebook for some $2billion.

With more projects launched and funding sites surviving to become household names, trust in the sector has grown with more and more people happy to invest their money direct to a cause they really believe in. Unlike traditional investment in business owning a part of the company isn’t usually part of the deal. Investing in a project means funders see a return in the form of a favourable product, service or event becoming a reality that otherwise wouldn’t have happened.

One unique example of a cause that’s nearly doubled its funding target is ‘Bring the Foo Fighters to Cornwall’ (crowdfunder.co.uk/foofighters) with less than two weeks to go, it won’t be long before Dave Grohl and the gang have to seriously consider a gig in the heart of the West Country.

Luke Sanderson