While discussing the stock market over dinner recently, John Mackey, the Founder and CEO of Whole Foods said unequivocally: "I wish crowdfunding had been around when I started Whole Foods." (full article here)
As I have not been living (sadly) on a desert island for the past few years, I have heard and read many stories about crowdfunding, but what is it in actual facts and could it be something worth trying for the many future entrepreneurs out there? Could it work for a small start up? An online shop? How do I go about it?
The clinical definition given by Wikipedia is the following:
`Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet. One early-stage equity expert described it as “the practice of raising funds from two or more people over the internet towards a common Service, Project, Product, Investment, Cause, and Experience, or SPPICE.”
The crowdfunding model is fueled by three types of actors: the project initiator who proposes the idea and/or project to be funded; individuals or groups who support the idea; and a moderating organization (the "platform") that brings the parties together to launch the idea. In 2013, the crowdfunding industry grew to be over $5.1 billion worldwide.`
So in other words, anyone with an interesting idea and a good business plan could raise funds via one of the many online platforms. There are dozens of crowdfunding websites that have been popping up recently so it takes a little bit of research to understand which are the real communities that have funding successes under their belt.
ChanceBarnett, CEO of Crowdfunder, shares his advice:
There are 2 main models or types of crowdfunding. The first is what’s called donation-based funding. The birth of crowdfunding has come through this model, where funders donate via a collaborative goal based process in return for products, perks or rewards.
The second and more recent model is investment crowdfunding, where businesses seeking capital sell ownership stakes online in the form of equity or debt. In this model, individuals who fund become owners or shareholders and have a potential for financial return, unlike in the donation model.
Crowdfunding sites to choose from
Below is a list of crowdfunding sites that have different models and focuses. This list can help you find the right place for your crowdfunding goals and needs.
Kickstarter is a site where creative projects raise donation-based funding. These projects can range from new creative products, like an art installation, to a cool watch, to pre-selling a music album. It’s not for businesses, causes, charities, or personal financing needs. Kickstarter is one of the earlier platforms, and has experienced strong growth and many break-out large campaigns in the last few years.
While Kickstarter maintains a tighter focus and curates the creative projects approved on its site, Indiegogo approves donation-based fundraising campaigns for most anything — music, hobbyists, personal finance needs, charities and whatever else you could think of (except investment).
Crowdfunder.com is the platform for raising investment (not rewards), and has a one of the largest and fastest growing network of investors. It was recently featured on Fox News as the new breed of crowdfunding due to the story about a $2 Billion exit of a crowdfunded company.
Rockethub powers donation-based funding for a wide variety of creative projects.
What’s unique about RocketHub is their FuelPad and LaunchPad programs that help campaign owners and potential promotion and marketing partners connect and collaborate for the success of a campaign.
Crowdrise is a place for donation-based funding for Causes and Charity. They’ve attracted a community of do-gooders and and fund all kinds of inspiring causes and needs.
A unique Points System on Crowdrise helps track and reveal how much charitable impact members and organizations are making.
Tilt (formerly CrowdTilt) is the rewards-based crowdfunding solution for groups and communities to pool their dollars and raise money together. As the company explains, a key differentiator of Tilt is the leaned-down or ”simplified” experience relative to other rewards-based platforms. The average campaign size on Tilt was $1,650 as of July 2014 – smaller than that of other rewards-based platforms.
If you want to build the next new mobile app and are seeking donation-based funding to get things off the ground or growing, then check out appbackr and their niche community for mobile app development.
If you’re a tech startup with a shiny lead investor already signed on, or looking for Silicon Valley momentum, then there are angels and institutions finding investments through AngelList.
You might want to create your own crowdfunding community to support donation-based fundraising for a specific group or niche in the market.
If you’re an inventor, maker, or tinkerer of some kind then Quirky is a place to collaborate and crowdfund for donation-based funding with a community of other like-minded folks.
These 10 crowdfunding sites cover most campaign types or funding goals you might have. Whether you’re looking to fundraise or not, go check out the sites here that grab your attention and get involved in this collaborative community.
For more names and the latest updated list of communities, take a look at: crowdfunding.com
`Sibylle Stoeckli, a young industrial designer from Lausanne, successfully financed her Global Design Research field project thanks to wemakeit.ch. Her target of CHF10,000 was reached within 30 days and she is currently on a mission to compare the criteria of design sustainability from five continents.
“I would never have been able to finance this project otherwise,” she told swissinfo.ch in a phone call from Asia where she is completing the first leg of her research.`
Learn the full article and more about crowdfunding in Switzerland, `Swiss join the crowdfunding craze`
More success stories? `10 Crowdfunding success stories to love`
So is your business plan ready yet?