Crowdfunding
Financement participatif in French
Quick definition
Crowdfunding raises money online from many people in small amounts each. Depending on the model, backers receive a product, a thank-you, interest payments, or actual shares in a private company.
Rewards crowdfunding: pre-selling a product
In a rewards campaign, backers pay today for a product or perk that does not exist yet. For the creator it is a pre-sale that finances manufacturing; for the backer it is a purchase with delivery risk. Projects run late, arrive different from the pitch, or never ship at all, and the platform generally does not guarantee delivery.
Donation crowdfunding
Donation campaigns fund causes and emergencies: medical bills, disaster relief, community projects. Donors expect nothing back beyond updates and gratitude. It is the simplest flavour, and the one where verifying that the story is real matters most, because generosity attracts fraud.
Debt crowdfunding: peer-to-peer lending
In debt crowdfunding, many individuals collectively lend to a person or business and earn interest as the loan is repaid. It is a real credit product operating under lending and securities rules, and the core risk is ordinary credit risk: if the borrower defaults, the lenders take the loss.
Equity crowdfunding: real shares
Equity crowdfunding sells actual shares in private companies to the public through registered online portals. It gives startups an alternative or complement to seed capital from angel investors or venture capital funds, and it gives ordinary people access to a kind of investing once reserved for the wealthy. Because the risks are severe, securities regulators cap how much an ordinary investor can put into these offerings.
For raisers: what a campaign really involves
A successful campaign proves demand with real money, which is marketing gold and a credential for later investors. But the platform keeps a percentage of what you raise, some platforms are all-or-nothing so you collect only if you hit your goal, and every reward promised is a real obligation to hundreds or thousands of customers. Budget fulfillment honestly before launching; campaigns have succeeded at raising money and then failed at delivering, in public.
For backers and investors: an honest read
A rewards pledge is a purchase, not an investment: if the product succeeds wildly, you get one unit, and if it fails, you likely get nothing. Equity crowdfunding is a genuine investment, and a brutal one: most startups fail, the shares have almost no liquidity because there is no market to sell them on, and you may wait many years for any outcome. Put in only money whose total loss you can shrug off.
In Canada
Equity crowdfunding in Canada operates under provincial and territorial securities rules, with offerings run through registered funding portals and limits on how much individuals can invest. Two soft tax notes for Canadians: money a business raises through a rewards campaign is generally taxable business income, since it is revenue from pre-sales, and a donation only produces a tax receipt if the recipient is a registered charity, which most personal campaigns are not.
Worked example
A Toronto designer pre-sells a board game through a rewards campaign: 2,000 backers at $40 raise $80,000, comfortably past her all-or-nothing goal. The platform's cut takes several thousand dollars, and manufacturing plus shipping 2,000 games absorbs most of the rest, so the campaign is closer to break-even than to profit. What she actually gained is proof of demand, 2,000 customers and a credential that later helps her land retail orders. Her backers got their game eight months late, which, by crowdfunding standards, counts as a success.
Related terms
Reviewed by Alexandre Bernier, CFP®, CIM®, PFP®·Updated August 2026