Crowdfunding is an Anglo-Saxon term that literally means: "collected from the crowd". It represents a type of collective financing implemented by a group of people who combine their resources to realize a project. Internet has brought this process to digital platforms.
Putting money in a specific project selected through the use of an online platform means becoming a donor, a funder, or an investor, depending on the nature of the project in which one chooses to put his/her money. From this distinction, the four major categories of crowdfunding are generated:
- Donation crowdfunding: allows for economically supporting a specific social, environmental, etc. cause as an act of liberality. You are not expected to receive anything in return for your contribution.
- Reward crowdfunding: allows for economically supporting an innovative project or idea. You are expected to receive, in advance of the market, the product or service that you have chosen to support in exchange for your contribution.
- Equity crowdfunding: allows you to buy the quotas of a capital company, thus investing your money in it. In return for his/her contribution, the Investor expects to obtain a strong increase in the value of his/her quotas and/or the distribution of important profit by the company.
- Debt crowdfunding: allows you to subscribe a debt security or a bond, issued by a company that carries out a specific real estate project. In return, on the date established by the debt security and/or bond, the investor will receive the capital invested, plus the fixed interest rate.
- Lending crowdfunding: allows for lending money to a company that will use it for its development plans by paying a fixed return on its loan.
Equity crowdfunding and lending crowdfunding are also defined as "Crowdinvesting." In return for his/her investment or loan, the Investor expects to obtain a return on capital.