---
title: What is Crowd Funding?
description: What is Crowd Funding?
image: https://www.bluehorizonvc.com/hubfs/Imported_Blog_Media/crowd-funding_sml_-1.jpg
---
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# What is Crowd Funding?
by [Todd Smith](https://www.bluehorizonvc.com/blog/author/tsmith1) | Mar 21, 2014 | [Blog](https://www.bluehorizonvc.com/blog/tag/blog)
Hopeful entrepreneurs all over the world look for funds to help start up new businesses. Some entrepreneurs go to banks in hopes of getting a business loan. Others search out investors who contribute funds to get a business running. Although these sources of funds can be helpful, there is another funding source that might be a better option for startups. Crowdfunding is an investment source that sometimes goes unnoticed.
**What is Crowdfunding?**
Crowdfunding is a way for a group of individuals to pool resources in order to fund startup businesses or organizations. An individual that is a part of a crowdfund has two options. The investors can donate the money through donation-based crowdfunding with the knowledge that they will not receive anything back. Alternatively, the investors can purchase a portion of the endeavor, which is known as equity-based crowdfunding.
**How Can Crowdfunding Help Startups?**
No matter which source of crowdfunding is used, this investment gives entrepreneurs the funding they need to finance an idea. Crowdfunding raises the capital used to begin a new business or to start a new project, allowing entrepreneurs to stay away from traditional bank financing options. This can be beneficial for entrepreneurs since sufficient startup capital increases the chances of success.
[](https://www.bluehorizonvc.com/hubfs/Imported_Blog_Media/crowd-funding-lrg.jpg)
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\The difference between Donation Based and Equity Based Crowdfunding\
[](http://www.amazon.com/The-Adventure-Consultant-Tales-Entrepreneurial/dp/1599324415)
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