“Tua Pek, what do you do for a living?” my 7-year old niece asked me during our family’s Chinese New Year holidays in Vietnam recently. I murmured something along the lines of helping companies borrow money.
“But how?” she followed up. Kids!!! They and their “why” and “how” questions. But as the weeks and months rolled by, I continued to give her questions more thought and how I can answer all these follow-on questions in the simplest manner.
Most of us would have experience “crowdfunding” in some form or other in our lives – mainly when we were younger. I recall the times when I went around my neighbourhood during my student days canvassing for donations for causes such as a school project or for the Blind Centre. It was hard work, walking tens of miles and knocking on doors. Little did I know then but it was “crowdfunding” at its very basic level. These days, crowdfunding is “in” because of technology where on the click of a button allows one to communicate with lots and lots of people. It has made sourcing money from the public, aka the crowd, much easier. As they say, money makes the world go round and the power of harnessing the crowd to come together to finance something that each one of them believes is a powerful driving force.
Crowdfunding, as we know it today, is a very general term that is used to refer to initiatives that involve the raising of money from the crowd. For example, it could be in the form of donations for a charity or for a good cause to help someone or a group of people in need at that particular point in time. Or it could be to raise financing to develop a product. Or to sell shares in one’s company to raise capital. Or to borrow money to fuel one’s business growth.
If you search online, one of the main definitions of crowdfunding is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the internet. The internet has made the world a much smaller place and hence, it is the simplest way of sourcing money from the public.