Glossary of Common Terms
Term |
Definition |
|---|---|
User Roles |
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| Backer | A backer is an individual or entity that supports a project or company by pledging money on a crowdfunding platform. Backers often receive rewards or incentives, like products or equity, depending on the nature of the crowdfunding campaign. A backer can also be a project creator. |
| Supporter | A supporter in the context of crowdfunding is an individual or organization that contributes financially to a campaign. Unlike a backer, who may expect rewards or incentives in return, a supporter often contributes to aid the project or cause without expecting anything tangible in return. A supporter can also be a project creator. |
| Creator | A creator in crowdfunding refers to the individual, team, or organization responsible for initiating and managing a crowdfunding campaign. Creators present their project or idea to the public, set the funding goal, and provide updates and rewards to backers as the campaign progresses. A creator can also be a backer/supporter. |
| Site Owner | A person that owns and/or manages the administrative tasks of the website. The site owner can also be a backer/supporter, and/or a project creator. |
Crowdfunding Types |
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| Reward-based funding | Reward-based crowdfunding is a type of crowdfunding where backers receive a tangible item or service in return for their support. This is one of the most popular forms of crowdfunding, and it's commonly used by creators to launch new products, art, music, and more. |
| Donation-based funding | Donation-based crowdfunding is a way to raise funds for a charitable cause or individual need without providing any financial or tangible return to the donors. People contribute to the project simply because they believe in the cause or want to help. |
| Equity funding | Equity crowdfunding is a form of crowdfunding where investors become company shareholders by purchasing shares or other forms of equity. This allows small and early-stage companies to raise capital from a broader investor base, often through specialized online platforms. A backer obtains a share of a product or company in exchange for the financial investment to the project. |
| Investment funding | Investment crowdfunding allows businesses to raise capital by selling securities to individual investors online. This type of crowdfunding offers investors the potential for financial return, unlike donation-based crowdfunding, where contributions are made with no expectation of financial gain. |
| Loan-based / P2P Lending funding | Loan-based crowdfunding, or peer-to-peer (P2P) lending, is how individuals or institutional investors lend money to individuals or small businesses online. It often operates through a platform that matches lenders with borrowers and facilitates the loan process. |
| Real estate funding | Can be equity or debt/loan based for the purposes of funding real estate development or acquisition. |
| Regulation crowdfunding | Regulation Crowdfunding (Reg CF / A) is a U.S. securities law that allows eligible companies to offer and sell securities through crowdfunding. This regulation outlines specific rules and limits for companies and investors to protect the interests of all parties involved. |
Funding Types |
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| Immediate Capture | The immediate capture funding type is commonly used for donation-based fundraising, or where a minimum threshold is not needed for the crowdfunding activity to proceed. This type of funding captures money from the backer/supporter at the time of the checkout transaction. Funds are sent to the project owner at the time of the transaction. Receiving funds is not reliant on the project meeting its goal. |
| All-or-Nothing | The All-or-Nothing, also called 100% Threshold, is a common funding type used when a minimum funding amount is required to proceed with the project. This is most commonly used for funding new business ventures or product launches. This funding type uses a pre-authorization transaction in which the backer/supporter agrees to pay the pledged amount if/when the project meets its goal. Funds are only captured if a project reaches its goal. This method eliminates the need to issue refunds if a project does not meet its goal. |
| Recurring / Subscription | Recurring or subscripton funding permits backers/supporters to pay a fixed amount on a regular interval (i.e. weekly, monthly, annually) to the project. This method is often used with donation-based funding. |