From Kickstarter campaigns to Ice Bucket Challenges for charity, when it comes to raising funds in today’s hyper-digital world, online crowdfunding is generating attention from artists, media, non-profits and entrepreneurs alike. There’s no doubt it has proven successful for a variety of opportunities, but is it relevant to serious investors?

Online crowdfunding platforms like Kickstarter and Indiegogo are changing the way we finance projects and services. In fact, the global market size for capital raised via crowdfunding was estimated at $5.1B in 2013 and is projected to grow to $9.6B in 2014, according to the advisory firm Crowdfund Capital Advisors. The increasing influence of social media, as well new regulations that allow the accredited investors to receive company equity in exchange for funding – have further escalated interest in this emerging asset class. As a result, dozens of new crowdfunding sites have emerged recently, which only adds to the confusion and complexity for investors looking for serious deals.

However, while the number of crowdfunding sites seems to proliferate daily, most can be categorized into one of three basic categories. In a recent FOX webinar, “Demystifying Crowdfunding: Global Developments and Opportunities for Family Offices,” Jason W. Best, co-founder of Crowdfund Capital Advisors, and Douglas S. Ellenoff, founder and managing partner of Ellenoff Grossman & Schole LLP, identify the basic crowdfunding models:

• Donation-based crowdfunding – In this model, supporters donate to a specific cause, with no goods or services exchanged.

• Reward-based crowdfunding – In exchange for a pledge, a backer receives a gift or other reward (like the product when it is released).

• Equity crowdfunding – In this newest model, investors receive a stake in the company in exchange for funds.

 Unlike other types of crowdfunding, equity crowdfunding is a highly regulated industry – just like traditional methods of equity financing. The key difference is the use of a digital distribution platform rather than paper prospectuses. While donation and reward-based sites like Kickstarter are open to anyone, equity crowdfunding sites like CircleUp and MicroVentures offer investment opportunities exclusively for accredited investors.

While equity crowdfunding likely holds the most appeal for serious investors, all three models provide an exciting way to discover and fund entrepreneurial ideas and charitable causes. The key for serious investors and philanthropists is to be able to cut through the buzz and develop a thorough understanding of how these platforms operate, the types of investments they support, and what’s driving their growth. In addition, they need to be clear on the fine print of how their investment will be used, and what – if anything – will be given in return before providing any funds.

To learn more about crowdfunding, the FOX webinar on the topic is available on the FOX website. Best and Ellenoff go beyond the basics to provide viewers with a deep examination of the crowdfunding market and best practices for potential investors. <<Demystifying Crowdfunding: Global Developments and Opportunities for Family Offices>>