Fundraising through rewards-based crowdfunding or seed funding is a strategy that involves receiving financial contributions from backers in exchange for a product or service to be received at a later date.

Equity crowdfunding differs from reward-based crowdfunding in that it allows a startup or private company to exchange funding for equity or stock or securities to be sold to the inventors or backers. This can involve the sale of stock, convertible notes, debt, revenue shares and so on.

Crowdfunding is the process where a startup funds its new product or service by raising small amounts of money from a large number of people in order to generate seed capital and provide the product or service at a later time.

A business owner, inventor or creator creates a “pitch” by describing their product or service through a video or landing page and asks backers to contribute to the successful launch of the product or service.

The birthplace of crowdfunding originated in Britain by a rock band in 1997. The rock band successfully crowdfunded its reunion through online donations from fans and music lovers. This inspired the birth of the first crowdfunding platform named ArtistShare in 2000 and the rest is history.

This type of financing works well for inventors, start-ups and small businesses looking for an alternative way to find seed capital.