Center for Regional Food Systems

Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet. Crowdfunding can also attract business investors seeking to support a moral agenda. The platform expands accessibility to investors with varying levels of financial resources, as it allows funders to make both large and small contributions. In addition, it increases the support base of parties with a vested interest in the success of a business. 

There are several models of crowdfunding: donation, debt, equity, and reward-based. Donation-based models depend on investors having a shared belief in the business cause. Debt-based models promise a return of investment to funders. Equity crowdfunding guarantees a share of the business for investors. Many business start-ups employ reward crowdfunding as well, which offers investors services or goods from their business. Most crowdfunding resources are best suited for small to medium-sized investments. 

Crowdfunding is a fundraising platform that is changing rapidly, so it is recommended that those interested in using it to develop or grow their business do their own research first to make sure they have the most up-to-date information, particularly pertaining to terms of use, laws, and regulations. The State of Michigan’s  Licensing and Regulatory Affairs offers ideas on what to keep in mind as you consider if crowdfunding is right for your business.