Crowdfunding is a business model that involves crowdsourcing the financing of a project. Its purpose is to constrain the influence of professional investors. It begins with announcements intended to generate interest in on projects seeking potential backers. Most crowd funders, as they are referred to, are private individuals or private collectives that invest freely in any given project. Backers receive a project-specific reward in exchange for their support: this may be the final product developed by the project (for example, a CD or DVD) or additional special benefits such as bonus material. Funding is typically an all-or-nothing proposition, which means that a project can only proceed if the minimum funding goal is met, minimizing the likelihood of having to terminate a project after it has been launched. Unlike traditional financiers or banks, crowd funders may be more concerned with seeing a project through than with maximizing their returns. To encourage such motivations, a cap on the amount of money that crowd-funders can invest in a given project is occasionally imposed. This has now become a legal restriction as a result of the financial regulations enacted in the aftermath of the decade-long financial crisis. Crowdfunding provides a unique opportunity for project creators to expand their circle of investors and thus increase their chances of obtaining favorable financing terms for their project. The fact that the project is announced in advance serves as free advertising for its creator and may have a positive effect on the product's subsequent success.

When and how to apply Crowdfunding:

This pattern is intuitively appealing to both businesses and individuals. To begin, crowdfunding provides critical access to zero-interest financial resources. Additionally, it enables project initiators to obtain early validation for their ideas and forecast the future success of implemented projects. Additionally, project initiators receive valuable feedback, critique, and comments from members of the audience, allowing them to fine-tune their concepts without having to build prototypes or test the product in an expensive pilot phase. Crowdfunding is a good option if you have an appealing idea that you believe will be supported by a large number of people willing to put their money where their mouth is. A well-known example of a company that uses this pattern is Kickstarter.