Crowdfunding
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Term
Main definition
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Funding of a project or venture by raising many small amounts of money from a large number of people via the Internet and the resultant accessibility of vast networks of friends, family and colleagues through social media websites like Facebook, Twitter and LinkedIn. Crowdfunding expands the pool of investors from whom funds can be raised by a startup beyond the traditional circle of owners, relatives and their friends. In the United States, crowdfunding that amounts to offering securities is restricted by regulations on who is allowed to fund a new business and how much they are allowed to contribute. These regulations are supposed to protect unsophisticated, 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.
