Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture. Crowdfunding has dramatically changed the way that businesses and creative projects are able to get cash to get started.

In most jurisdictions, restrictions apply to who can fund a new business and how much they can contribute. Similar to the restrictions on hedge fund investing, these regulations are supposed to protect unsophisticated or non-wealthy investors from putting too much of their savings at risk. Because so many new businesses fail, their investors face a high risk of losing their principal.

Crowdfunding has created the opportunity for entrepreneurs to raise hundreds of thousands or millions of dollars from anyone with money to invest. Crowdfunding provides a forum to anyone with an idea to pitch it in front of waiting investors.