The roots of crowdfunding date back to the early 1700s when Jonathan Swift founded the Irish Loan Fund that provided a high volume of small loans to low-income, rural families with no collateral or credit requirements. However, the most common perception of modern-day crowdfunding is what we call rewards-based crowdfunding, as experienced through websites like Kickstarter or IndieGoGo.

So, what else is out there and why should the general population pay attention? Well, because some of the principals of days long-gone have come full circle to benefit both small businesses and everyday supporters of those businesses.

Let’s take a look.

Rewards-based crowdfunding in the United States started in the early ’90s with increased access to the Internet and more readily-available online donation engines. And donation is the keyword here. These weren’t investments because there was no possibility of a financial return, but it provided a way for money to be raised fairly easily and efficiently from multiple contributors.

Cause-based and charity organizations jumped on the opportunity to take their asks online and potentially receive donations from anyone that stumbled across or shared their offerings.

This new, online donation model became extremely effective and eventually grew to include small business capitalization through the aforementioned rewards-based crowdfunding behemoths, Kickstarter ($4.12 billion raised since 2009) and IndieGoGo ($1.6 billion raised since 2007).

The core concept was to encourage individuals or companies raising money to offer some sort of non-monetary incentives, perks or rewards that become more valuable as the donor’s level of donation increased. The reason we call this model rewards-based crowdfunding is that many individuals donate small amounts of money to help support a fundraising campaign in exchange for some sort of non-monetary reward (a free membership, a discounted meal, T-shirt, etc.), but again, no actual investment.

While this concept has proven to work extremely well in getting individuals to contribute their money to companies that they find interesting or simply want to support, the mechanism of rewards-based crowdfunding has met some challenges in scaling to support the larger raises that some small business owners and entrepreneurs seek.

Which brings us to Investment Crowdfunding. Today, while bank loans, angel investments and venture capital continue to remain elusive to the vast majority of small business owners, the concept of crowdfunding has evolved to include actual investment opportunities with the signing of the Jumpstart Our Business (JOBS) Act in 2012.

This legislation eased regulatory burdens on entrepreneurs seeking start-up capital, with the goal of encouraging small business and startup funding throughout the United States. At the bill’s signing, President Barack Obama remarked, “for the first time, ordinary Americans will be able to go online and invest in the entrepreneurs that they believe in.”

This, in effect, allowed entrepreneurs or companies raising capital to promote and advertise their stock, debt or revenue-share offerings to the general public, not just accredited investors (otherwise known as “rich folks”). This gave entrepreneurs an incredible amount of new flexibility in spreading the word about their fundraise, and went hand-in-hand with the potential reach and sharing-power of the social web.

Advancements in investment crowdfunding – sometimes called equity crowdfunding or community-based capital – continue to take advantage of technology to help entrepreneurs and small business owners spread the word of their fundraising efforts to much larger audiences of both everyday citizens and accredited investors. We see offerings being promoted to potential investors through new and evolving regulations at both the federal and state levels, using communication channels including social media, websites and email.

Investors – accredited folks that have a bunch of money and those “everyday” investors that simply want to support companies they love and/or take advantage of perks that could potentially be more valuable than the actual amount of money they’ve invested – are driving the industry.

Hometown-based entrepreneurs who want to tap into their local community for support, unique business concepts that already have a niche customer-base, established organizations that have an opportunity to grow with additional capital, affinity-based businesses including women-owned, veteran-owned and minority-owned, and underserved business communities now have the ability to raise capital by tapping into their crowd. This provides very real opportunities for those that invest to see benefit in both perks and the potential of a financial return.

For more information on North Carolina companies already using investment crowdfunding to raise money, or if you are a business owner in need of additional capital, visit INVESTinNC.com to learn more.

INVESTinNC is a program designed to inform North Carolina investors and small business owners of new investment crowdfunding opportunities.