A funnel cloud is a tight rotating column of air (that is often the start of a tornado) that never reaches the ground.
Storms can produce funnel clouds, but never produce a tornado.
A tornado on the other hand, is when that rotating column of air, and that tight circulation reaches the ground - and it then can cause damage.
So a funnel cloud stays up in the sky, and it doesn't become a tornado until it actually reaches the ground.
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