There are 4 basic types of crowdfunding.
Gift crowdfunding is where you invest in a project to support the project, so in return you get a gift that is worth a bit less than your investment. A KickStarter campaign is a great example, where for $1 you get a social media shout-out, for $5 you get a sticker, for $40 you get a t-shirt.
Pre-Order crowdfunding is done by some KickStarter campaigns where you pay for the product before it is available for purchase. They use the money to finish the design and manufacturing of the product and you receive the product when it becomes available.
Charity crowdfunding is when someone needs assistance. As an example, someone has a health issue and needs to collect funds to pay for a treatment. They would post their campaign on a site like GoFundMe and collect donations.
Equity crowdfunding is truly investing. The investor gets a percentage ownership. Good for new business startups and real estate projects.
