A new and emerging way of funding new ideas or projects by borrowing funding from the crowds.
In these markets, any individual can propose an idea that requires funding, and interested others can contribute funds to support the idea. These markets have recently emerged as a viable alternative for sourcing capital to support innovative, entrepreneurial ideas and ventures.
A novel aspect of crowdfunded markets is the nature of the publicly observable popularity indicators typically recorded and published within the marketplace. For instance, the information on prior investments in crowd-funded markets typically includes a time stamp and the specific amount contributed, or both. These values contribute to what is often referred to as a project’s current ‘funding status'. This status encompasses prior funding decisions made by others regarding a particular project, indicating the total funds raised, the number of contributors, and the duration over which that funding has taken place.
Most crowdfunding offerings don't involve an "ownership" stake. Hence, equity sales are prohibited by regulatory bodies such as the Securities and Exchange Commission in the US. Recently, however, regulation is in the works to ease such constraints and enable equity stakes.