Crowdfunding has emerged as an exciting alternative to traditional business financing. In essence, a crowdfunding model solicits a large number of smaller investments from an extremely broad base of investors, allowing entrepreneurs to raise the capital they need to get a project off the ground without exposing any single investor to a deterring level of risk.
While crowdfunding has shown some promise, there is still risk involved and investors need to have realistic expectations. Also, entrepreneurs should be aware that many crowdfunding ventures fail before they reach an operational stage, and understand strategies they can use to increase their chances of success.
Because of its collective nature, crowdfunding shields investors from significant losses and because individual contributors don't generally contribute large amounts of money.