Crowdsourcing and crowdfunding
In the context of financing, crowdsourcing is the process of getting funding, usually online, for a project from a large number (or crowd) of people who typically each contribute small dollar amounts. With crowdsourcing platforms (such as Kickstarter), the entrepreneur will set a target for the dollar amount to be raised, the deadline by which it must be raised and any reward to the persons contributing to the project. Typically, the dollar amount to be raised must reach the targeted amount on or prior to the deadline or all funds raised must be returned to the people who contributed to the project. Crowdsourcing does not involve the issuance of shares of , convertible notes or other securities to those persons who contribute. Instead, they typically receive a copy of the product that their contribution helped fund or some other token of appreciation rather than a stake in the company.
, such as proposed under the , is different than crowdsourcing. In crowdfunding, many investors are connected—usually through the Internet—and pool their money to purchase securities of a company. Some online networks, such as AngelList, only connect entrepreneurs and companies with . In 2012, Congress passed the