With the advent of the internet and social media, a completely new way to invest in business has arisen. Crowdfunding is a method of raising capital in small amounts from a large group of people using the World Wide Web.
Unlike funds from venture capitalists or angel investors (also known as a business angel or informal investor) – an affluent individual who provides capital for a business start-up – the money raised through crowdfunding doesn’t necessarily buy the lender a share and there is no guarantee it will be repaid if the venture is successful.
Crowdfunding is also known as crowd source capital.
Crowdfunding allows individual investors to pledge funds, sometimes as low as $5, towards startups around the world.
While this is a great opportunity for potential business ideas to become reality, Better Business Bureau of Acadiana reminds backers that there can be dangers with these types of investments.