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In over four years of operation, leading crowdfunding site Indiegogo reports virtually no fraud. U.K. crowdfunding leader Crowdcube (which does allow equity finance) reports no fraud.  As is the case for U.S. based peer-to-peer lending site Prosper or AngelList, the popular site for angel investors searching for deal flow from entrepreneurs.  Never let the facts get in the way of a good FUD story.  If you commit fraud online, your life is over.

Fraud feeds on opacity and on small groups, because those factors increase the probably of not being "found out".  Ironically, that would well describe the environment of the traditional investment paradigm.  But in the social networking sphere, the more viral any story gets, the more the chances that fraud will be exposed by the people who would know.

If we make it hard for Americans to invest in crowdfunding, then entrepreneurs will tend to get funded with larger percentages of foreign money.

Mr. Hardy is among a small but growing number of small-business pioneers already cracking open those doors, by raising capital through the online social-networking process known as "equity-based crowd-funding." Nine months ago, Mr. Hardy and three co-founders raised $41,000 from 17 investors on a fledgling equity crowd-funding site called ProFounder to launch Fargo Beer Co. in Fargo, N.D.

the state agency issued a formal consent order to ProFounder to "desist and refrain" from engaging in securities transactions

some critics believe they may increase the chance that unsophisticated investors will get scammed by people who aren't really starting new businesses

these laws now make it almost impossible to invest in small businesses in our communities and pretty much compel us to invest in the New York Stock Exchange. In the name of protecting investors, securities laws now make it very difficult to raise money with crowdfunding.

Failure to comply with these requirements can, at a minimum, result in having to return all your investors’ money. At worst, there could be civil and even criminal penalties.

Ask for donations!

As crowdfunding has matured from a series of one-off efforts into something reproducible, the money has followed.

Venture capitalists have also shown an interest by investing in start-ups that facilitate crowdfunding.

Of those that are accepted, about half meet their funding goals: around 1,600 projects had been funded by July 2010.

at the 3rd Annual Film Finance Forum West, where an inconspicuous crowd-funding panel presented IndieGoGo, Audience Productions and Sokap, three new crowd-based companies that can topple the remaining barriers-to-entry, and fully democratize filmmaking.

Audience Productions is the first film company to be authorized by the SEC and 20+ states to use both the internet and crowd-funding to sell shares in their films for the purpose of raising their financing.

As the local distributor of your selected territories, you can show the film in local theaters, sell it through local merchants, or directly to interested people or organizations in your territory. You just pay a small upfront license fee to the filmmaker which allows them to make the film and then you market the film until it's delivered, and collect a distribution fee from the revenues you generate. Like Audience Productions, this addresses filmmakers' critical need for alternative sources of financing while at the same time, also addresses the critical need for alternative forms of distribution in the U.S. and Canada

The convening power of the Internet, rapid advances in technology, and the reduced costs of launching a social enterprise in today's wired world are driving the race to create business models brimming with purpose. In this environment, social entrepreneurs like these are developing new solutions to take advantage of these advances and recreate yesterday's broken business models.

One example of their approach is crowdfunding -- the collective cooperation by people who network and pool their money together. And the implications, from technology to community-powered renewable energy to political campaigns or to financing the next wave of social enterprises, are immense. Think about how the Obama campaign flipped the standard campaign fundraising model on its head through harnessing small repeatable donations from the crowd.

It's an opportunity that has the potential to transform the business, political, and charitable landscapes. And it's already happening.  In this discussion, we ask for your insights on this current trend.  Some questions to consider:   1. What business model for social impact does your organization use?
 2. Does an opportunity exist for crowdfunding to scale your impact?   3. Besides the examples noted above, can you think of other possibilities to harness crowdfunding for good?     4. What isn't sustainable about your business model? Why? Could "tapping the crowd" for funds enhance your sustainability?

Crowdfunding Sources The sites listed below enable entrepreneurs, non-profits, and their supporters to solicit funds from individuals ("the crowd") via the internet.

General crowdfunding platorms AppBackr – Crowdfunding for mobile applications. Chip-in - a widget that can be posted on blogs, websites, and many social media profiles and that allows individuals, private groups, non-profits, and others to raise money online. Indiegogo - An online platform used for funding a range of campaigns. KickStarter - A crowdfunding platform for a broad spectrum of projects. Peerbackers - Enables entrepreneurs and non-profits to raise funding for their idea from friends, family, and peers. Rockethub - A funding platform and community for independent artists and entrepreneurs.

Green/social entrepreneur/non-profit platorms 33needs – A crowdfunding organization that connects micro-investors with social entrepreneurs who have ideas in categories such as sustainable food, health, education, and the environment. Ashoka Invest in Innovation - Funding platform to support Ashoka's network of social entrepreneurs. Causes - Provides an online fundraising platform (including leveraging Facebook) for nonprofits and other causes. CauseVox – Enables nonprofits and other causes to create online fundraising campaigns. FirstGiving - Enables non-profit supporters to create their own fundraising page to raise money for the cause of their choice. Give.fm (beta) – a micro-funding organization that helps nonprofits and individuals to set up a campaign to raise money for causes. Green Unite - A crowdfunding platform for sustainable products and clean technology. Greenfunder – A crowd funding platform for green, sustainable, and related projects. Razoo – A crowdfunding platform for non-profits and charities that allows individuals, organizations, corporations, and foundations to set up a fundraising page to raise money for their own cause or their other cause of choice.  Start Some Good – Connects social entrepreneurs with crowd funded venture capital.

Kickstarter, which just recently celebrated the 10,000th successfully funded project in its 2.5-year history, is under siege by that most ubiquitous of foes, presently at least: patent litigation.

Kickstarter has asked that the patent be invalidated, and failing that, that they be found not infringing.

IndieGoGo, a crowdfunding platform that was founded in 2008, has raised a $1.5 million funding round led by Metamorphic Ventures and Zynga cofounder Steve Schoettler

The site also uses an algorithm, dubbed the ‘GoGoFactor’, that determines which campaigns are featured on the homepage and the site’s outreach (the more engaged your users are, the higher you rank).

IndieGogo makes money by taking a percentage of the money that’s contributed: if you create a campaign and meet your stated goal, then IndieGoGo charges 4%; if you don’t meet that goal, IndieGoGo charges a higher 9% fee, but you get to keep the remainder of the money

Until now, U.S. regulations permitted these sites only to facilitate donations—not purchases of equity stakes. The Securities and Exchange Commission now is reviewing those rules, and many crowd-funding sites are pushing to axe the stake ban.

Launched in December, ProFounder has about 500 start-ups signed up and making pitches on the site. The average pledge is about $1,300; the average fund-raising, $30,000. ProFounder charges business owners $1,000 in service fees, on top of $100 to publish a fund-raising pitch. Ms. Jackley says she is already working with a legal team to lay the groundwork for online equity sales, an option she says will dramatically raise the amount of cash pledged by supporters.

Other sites like Profounder, which is currently in private Beta, aims to make crowdfunding easy for ordinary business owners. They'll assist in creating legal documents that will make the investments official and the terms easy to understand by all. Profounder will also enable users to hold both private and public rounds of investments, collect those investments, keep track of filings, deadlines and bookkeeping, and distribute repayments to investors automatically.

The role of nonprofits as a middleman is changing. The donors can more often support a specific project rather than the organization as a whole. Nowadays the donors can also easily have a direct contact with the beneficiaries.

The crowd can organize themselves around goals, campaigns and projects even without the structures that nonprofits have traditionally provided. People don't need a middleman, a nonprofit, to create the impact they want to see.

Sponsume is a new online platform to help individuals and organisations promote and crowd source the funding of their projects.

At Sponsume’s heart is the ability to let entrepreneurs, artists, charities, inventors, or just about anybody, raise funds for their idea through the sale of project vouchers, which can – should the project go ahead – be redeemed for various rewards. These can be almost anything, except equity and intellectual property rights, with the contract existing between the user and project owner, not Sponsume itself

Right now Sponsume is free for project owners to use but at a later stage the company plans on charging commission of around five percent of the total raised. Other revenue streams include interest earned on accounts, sponsored placements and partnering with video production companies.

Every year the World Economic Forum picks a number of up-and-coming technology startups from around the world and dubs them Technology Pioneers.

This year’s group includes CloudFlare, DoubleVerify, Dropbox, Kickstarter, Lending Club, and Palantir Technologies.

Crowd-funding website Kickstarter allows anyone with an idea for a film, album, art project, or product to make their pitch, say how much they need to get started, and ask for pledges. Once the minimum amount needed is pledged, the project gets started. To date, Kickstarter has helped fund more than 25,000 projects, with $75 million pledged.

The power of the crowd has proven to be particularly useful when it comes to fundraising online. Founder Institute startup CauseVox is launching a SaaS platform that allows non-profits to crowdsource fundraising.

While non-profits have a 30 day free trial to use the software, CauseVox will charge a small subscription fee and will take 7.5 percent of all donations. We have an exclusive offer for TC readers to use Causevox for free for six months.

In its beta period, CauseVox already helped non-profits, including Change For Kids and RestoreNYC, raise over $400,000 in donations.

Described as a fan-funded record label, My Major Company has launched in the UK with a mix of traditional A&R and crowdfunding.

It differs slightly from similar sites, such as Sellaband or the UK’s Slicethepie, in that the acts featured on the site are sourced by the startup’s own talent spotting department first. In addition, fans who choose to invest are essentially buying shares in any future profits made from the artist’s launch campaign as a whole (physical and digital music sales,

The model has been imported from France where My Major Company has been running since 2008,

What makes Kiva “social” are some of the typical features you would have in a social network, like pictures, profile, updates; but more than that, it’s that sense of personalisation that originates from knowing what you’re doing with the money you’re giving.

One of the first peer-to-peer lending site to launch was Zopa, a London-based company providing an online money exchange service. Zopa operates within the UK, Italy and a service is being developed for Japan.

 In 2006, Prosper was launched in the US, following the same model.  In 2007, LendingClub launched the second peer-to-peer lending site

The bill provides a crowd funding exemption from Securities and Exchange Commission registration of securities offerings, with certain limitations: A $10,000 limit per investor (or 10 percent of annual income, whichever is less). A cap on the amount a company can raise of $1 million per offering (and up to $2 million if audited financial statements are provided). No limit on the number of accredited or unaccredited investors.

newer (and crowd-based) tools to monitor online reputations are emerging. Either way, the potential to unleash untold numbers of new ventures is certainly exciting for would-be entrepreneurs.

Crowdsourcing has moved to the money arena, tapping the power of larger audiences to provide funding options for startups and established businesses. A host of websites dedicated to crowdfunding are popping up, matching small businesses, soloists and artists with people willing to invest in projects they find worthy of support.

Enter Unbound, a British effort to “crowd-fund” books. Visitors to its website can pledge money for a book that is only part-written. If enough money is raised, the author can afford to finish it—and the pledgers will get a copy.

The site is like a curated slush pile. It features pitches and excerpts from a handful of established writers, such as Jonathan Meades and Amy Jenkins. Visitors can stump up £10 ($16) for an e-book and a nod in the afterword, or up to £250 for such treats as lunch with the author.

Authors see a new way to nurture fans and make money, even as publishing budgets dwindle. (Unbound’s profits are split 50-50.) Readers apparently enjoy feeling like part of the creative process.