Ever had a good idea for a product and thought to yourself, if only I had a couple of thousand friends willing to buy one each?
That concept is responsible for launching the crowdfunding phenomenon online, and a growing number of small businesses have used platforms such as Kickstarter and Indiegogo to turn their ideas into reality.
Crowdfunding allows small businesses and individuals to make a pitch online in the hope that people will like the idea enough to pledge a stated amount of cash.
On sites such as Kickstarter, each project is featured on a page that allows the creator to put up videos and photos, and describe what their idea is.
Typically, owners already have some form of prototype that they can demonstrate, and they're looking for funding to put the project into mass production.
The project is given a funding cap and deadline.
If it attracts sufficient funding by the deadline, the project is a success.
Those who pledged will get billed, and can expect to receive their product.
If it fails to reach the funding goal, it falls through and pledgers do not need to pay anything.
The idea is for entrepreneurs to tap sufficient funding without having to go through the typical barriers of shopping for angel investment or giving a venture capitalist a stake in their firm.