Crowdfunding vs. Crowdinvesting: Why the distinction matters
The terms crowdfunding and crowdinvesting are often used interchangeably in everyday language. That is understandable: both models are based on the idea that many people jointly finance a project. In practice, however, they differ significantly. Those who are unaware of these differences risk developing false expectations, particularly with regard to risk, regulation, and potential returns.
Taking a closer look is therefore worthwhile
Crowdfunding originally emerged as an umbrella term for financing models in which a large number of supporters help make a project possible. In most cases, financial returns are not the primary focus; instead, the idea itself takes centre stage. Supporters contribute in order to enable a product, promote an initiative, or become part of a community. In return, they often receive symbolic rewards, early access, or the finished product. There is generally no financial repayment, and the money provided is typically understood as a contribution or form of support rather than an investment.
Crowdinvesting works differently. Here, investors provide capital with the expectation that it will be repaid with interest or will participate in an economic outcome. This can take the form of loans, profit-linked participations, or other structured financial instruments. The key point is that this is an investment involving opportunities—but also risks. A total loss of the invested capital is fundamentally possible. For this reason, crowdinvesting—unlike traditional crowdfunding—is subject to specific regulatory requirements designed to ensure transparency and certain investor protection mechanisms.
Why does this distinction matter? Above all, because it forms the basis for realistic expectations. Treating crowdinvesting as a form of project support can easily lead to an underestimation of risk. Conversely, assuming that every form of crowdfunding automatically constitutes a regulated financial investment is equally misleading. Both models are legitimate, but they pursue different objectives and require different levels of responsibility from those involved.
For investors themselves, the distinction also has practical implications. While crowdfunding is primarily about the idea, the purpose, or a personal connection to a project, crowdinvesting requires a conscious assessment of economic risks, project structures, and underlying conditions. The decision to invest capital is fundamentally different from the decision to support a project.
Using the terms deliberately is therefore not a matter of semantics, but an important step towards greater clarity. It helps to correctly categorise financing models, manage expectations, and make well-informed decisions, regardless of which model one ultimately chooses.
