Where crowdfunding gets its roots and its popularity from websites which drive the rewards-based and donation-based crowdfunding. Think of Kickstarter or GoFundMe.
Kickstarter is the quintessential rewards based crowdfunding platform. The idea is that an individual gives money with the expectation of a completed project being returned. While that project may be a piece of art, frequently it is something like a book, a movie, an album being produced and sent to the people who funded the project.
Websites similar to GoFundMe offer donation based projects as well. These are situations where the donations go to help something. Either a person, a non-profit, or an event. These help people do things by helping them put capital up front by leveraging interested people.
These types of campaigns create opportunities to tell stories, to drive concepts forward. In truth, they are very powerful tools.
The investment based crowdfunding works a little differently. First, because there is the expectation of monetary interest and return, it is regulated by the SEC. Second, there is an economic interest in the company which offers the investment based crowdfunding. For example, in an Equity based project, ownership interest in the company is sold via crowdfunding.
Investment-based crowdfunding may not be the most effective way to raise money, as there is a one year limit on the amount a company can raise. And it is fairly low, at One Million dollars. Other security offerings such as the Regulation A+ or Regulation D may work better for a company. However, this is a question which must be answered based on the cost of raising the capital as well as the amount of capital needed.
This all can be complicated by the type of business and the goal of raising the money. If you have any questions, ask an attorney and they should be able to help you make a decision on if crowdfunding is right for you.