You're listening to the European Parliamentary Research Service podcast on a new EU proposal on crowdfunding.

More and more companies and individuals are turning to crowdfunding to help finance their dreams,

but without common rules across the EU, crowdfunding platforms have a hard time scaling up their operations.

But that could change soon, as the Commission is working on a single set of rules to better connect those with spare cash with those who need financing for a specific project.

Want to know more? Stay with us.

The word crowdfunding has slowly made its way into our economic vocabulary, but what does it mean exactly?

Well, it's understood as an open call for the collection of resources, generally money, but it could also be goods or even time, from the population at large through an online platform.

Until the emergence of this alternative form of financing,

companies could choose between internal or external funding.

In other words, using the owner's own resources or reinvesting the company's retained earnings

or through external sources such as loans from banks or investments from business angels or venture

capitalists.

But now they have yet another option, raising funds through crowdfunding campaigns.

Now, how does it work?

Well, what's important to know is that crowdfunding campaigns can raise funds for both

non-profit and for-profit projects and organizations, and they can take four main forms.

They can be donation-based campaigns where people

do not receive any reward for the contributions, except for some tax deductions, reward-based

campaigns where people receive goods or services in exchange for their contributions, lending-based

campaigns where people receive interest payments in exchange for their financial support, or

equity-based campaigns,

where the compensation for investors is shares in the venture.

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