What is crowdfunding?
Crowdfunding, a derivative of crowdsourcing, is the term for the collective cooperation, attention and trust by people who network and pool their money together in order to support efforts initiated by other people or organisations. This is usually done via the Internet.
Crowdfunding can be used for any variety of purposes; from political campaigns to business start-ups. This concept is not new. The Statue of Liberty was actually crowdfunded when the building project ran out of money and the realisation of the statue threatened to fail.
Crowdfunding can replace the need for specialised grant applications or other more formal and traditional fundraising techniques with that of a more casual, yet powerful, approach based on crowd participation. It is this reason that crowdfunding has emerged to encompass the act of informally generating and distributing funds by groups of people for specific social, personal, entertainment, business or other purposes.
So crowdfunding is very much related to online communities and social networks. The crowd can already exist as a community but they can also suddenly form from disparate groups around the world who all happen to share an interest in funding a person, project, event, campaign, etc. The Internet allows for information to flow around the world, increasing awareness.
Influence of the crowd is another factor. Crowd psychology sometimes can play a part in the success or failure of crowdfunding efforts; the crowd wants the initiative to be a success and will operate as a large marketing and improvement network.
More on crowdfunding on the crowdfunding Wikipedia page