Crowdfunding is a fairly new term born with the uprising and mainstreaming of social media. Essentially, it is using crowdsourcing to raise funds by asking a community of members that care about a business, product, service, or cause to contribute to the financing and progress of the project. Especially in today’s lean economy, it’s easier to ask 100,000 people loyal to a brand to donate $1.00 to a venture or cause they believe in rather than asking 1 person to part with $100,000 of their hard earned money.

As Russel Martin in an article for Canada.com succinctly put it, a crowdfunding venture requires three basic elements in order to be successful:

1) Interest — something that captivates emotion, tells a strong story and is lead by a real person with passion and authenticity.

2) Community — the venture must have an existing network of community and brand advocates to validate the story and is the first point of traction in order to initiate a successful crowdfunding campaign.

3) Cool Perks — most campaigns give-a-way fun stuff that you receive in exchange for your donation such as singing lessons or an artist may include you in their creation.  eg. Having your picture on the cover of their album.

In this video Brian Meece, CEO of RocketHub explains Crowdfunding: