What is crowdfunding?
Everything you should know

It’s hard to miss how much crowdfunding platforms have changed fundraising in just a few years. Folks don’t have to wait – on venture capital, lenders, or other traditional funding sources anymore. The crowd steps in instead—people you actually know, or maybe total strangers who just like your idea. Those backers? They’ve completely changed the game.

It’s kind of amazing when you stop and think about it for a second. Crowdfunding creates a bridge between startups, nonprofits, and entrepreneurs to supporters who really care. It’s accessible, adaptable, and, by and large, a lot less intimidating than pitching to investors in someone else’s boardroom.

And for small business owners? It’s validation. Seeing backers believe in your idea can mean more than any formal approval.

There’s more than one way to run a crowdfunding effort, and even different types of crowdfunding, and knowing which one fits your goal makes a difference.

Donation-based crowdfunding
This is the one you’ll see most often on GoFundMe. People give money with no strings attached. It’s built for community fundraisers, nonprofit efforts, or emergencies where donors simply want to help.

Rewards-based crowdfunding
Think Kickstarter or Indiegogo—organizers promise a thank-you gift or a new product once they hit their funding goal. It’s how countless creative projects and startups have come to life.

Equity-based crowdfunding
Here, backers act as potential investors. In exchange for funding, they receive small shares of a company. The Securities and Exchange Commission regulates this under the JOBS Act, giving accredited investors and everyday supporters a legal way to back new businesses.

Debt-based or peer-to-peer lending
This model feels closer to a business loan. Lenders (often individuals) provide capital that gets repaid with interest later. It’s one of the more flexible financing options for small business owners who want alternatives to banks.

Each of these crowdfunding models has its perks, and, honestly, mixing them can open even more funding opportunities.

Picture a tiny bakery that wants to buy new equipment. Or a tech founder building a new product in their garage. Both can launch a rewards-based crowdfunding page to test the waters.

The bakery could offer free cupcakes for donations. The founder may agree to provide early access when production begins. Either way, they get more than money; they get evidence that people care.

That kind of validation is priceless for small business owners or nonprofit organizations. It allows them to perfect their business plan, bring on family members or local investors, and even get picked up by venture capital firms. And sometimes, even if the numbers fall short, the visibility alone opens new doors.

1. Tell your story. Describe your initiative, purpose, and why it is important. Be real; people can feel authenticity. Add a photo that feels real—a sketch on the back of a napkin, a family picture, anything that reminds people there’s a person behind the page.
2. Pick the right online platform. GoFundMe works best for personal or nonprofit fundraising, while Kickstarter and Indiegogo suit creative ideas and startups.
3. Set a clear funding goal. Be specific about what the money covers. Break down amounts of money so backers can see the impact.
4. Promote everywhere. Share updates on social media, text your link, email your network. The more consistent you are, the better.
5. Thank everyone. It’s basic, but that simple thank-you often inspires one-time donors to become forever supporters.

Even small updates, like photos or short videos, keep momentum going and make your crowdfunding efforts feel personal.