Ever since the advent of the internet, people have been looking for all sorts of opportunities to make money from it, and “crowdfunding” is probably the most mature and sophisticated culmination of these efforts so far.
Crowdfunding is a way for people (or businesses) who need money for projects to raise that cash from people willing and able to lend it.
You see, with banks absolutely skittish about lending, crowdfunding presents an enormous opportunity for startups and niche interests to receive the capital they need. And with interest rates near zero, it’s a chance for lenders to reap outsized returns.
Small wonder why the crowdfunding sector has grown from less than $2 billion in 2009 to $8 billion in 2013 – and why it’s expected to keep growing.
In Part 1 of this series, we’ll cover the three types of crowdfunding classes – donation-based, peer-to-peer lending, and equity-based – and the types of projects in which you can invest.
Video length: 00:03:36
Investors can finance their projects through any one of several online platforms. Think of them as the stock exchanges of the crowdfunding world.
With the U.S. financial sector still on shaky ground and lending tighter than ever, crowdfunding has opened up a world of opportunity for entrepreneurs eager to launch exciting enterprises and investors looking for a much better rate of return.
It’s a truly breathtaking development that promises to upend what has been a stodgy and rigid sector, preventing both borrowers and lenders from taking a mutual interest in each other.
Risks will, of course, remain, but as the sector matures, the big wrinkles will become progressively smoother, as platforms keep responding to the mutual needs of investors and entrepreneurs.
In Part 2 of this lesson, we’ll break down some of the major platforms that investors can use to finance projects and share why crowdfunding is the future of investing.
