Crowd-funding 101, how to raise money on the web

Entrepreneurs are pooling small "investments" from thousands of internet users to raise millions of dollars for projects ranging from concerts to video games. CBC's Jesse Hirsh explores the promise, limitations, and risks of crowd-funding in the U.S. and Canada.

More than 80,000 internet users have pledged to pony up at least $15 each to help a group of entrepreneurs called Double Fine Productions make a new adventure computer game. In return, the funders are being promised perks that range from a copy of the game to lunch with its designers.

Together, they have raised $3.3 million for the project through the "crowd-funding" website Kickstarter.

Similar initiatives have been used to raise over $175 million to fund 20,000 projects ranging from films to apps to concerts, making crowd-funding a hot phenomenon.

"It evokes the romanticism of the internet," says CBC technology columnist Jesse Hirsh. "It's sort of the right ingredients that give people the optimism, the hope in a difficult economy that they might be able to bypass the bank, bypass the stock market and find people who support them on a much smaller social scale."

In March, the U.S. Senate passed the Crowdfund Act, which will allow companies to raise up to $1 million a year through crowd-funding via registered portals that commit to a list of investor protections.

Hirsh explores the promise, limitations, and risks of crowd-funding, how things change under the new U.S. legislation and what crowd-sourcing options are available in Canada.