Crowdfunding seems to have become more and more popular medium to source funding, as the number of such websites and funding niches grow. It all got started in it’s current form when kickstarter launched in 2009 to help artists, inventors and alike to make their ideas and products happen through small amounts of money gathered from individuals interested in the project. Since then Kickstarter has grown to be a very popular place to source funding: until today they have successfully gathered funding for over 50,000 projects worth total nearly $850M dollars. Quite impressive, huh?
How do crowdfunding websites really work?
The basic concept is quite simple: a crowd of people all chip in their chosen amount to collectively gather the targeted sum of money defined by the project creator. Some sites require the project to reach target in order to the project to be funded. If not, the money is not taken from the pledgers’ accounts. The time to raise that money is usually limited.
There are various models what the investors get in return for their investment. In some cases it can be the actual product that the project is set to produce. It can also be equity of the company. It can also be just a mention on the hall of fame or similar, usually in the cases of charity fund raising. The project creator can create layers of investment levels: e.g. $10 the investor gets X, $50 the investor gets Y and so on.
What crowdfunding websites are out there?
I have quite intensively been browsing the above mentioned Kickstarter, but also Indiegogo for the reason that many new 3D printer projects have been sourcing funding via those websites. Successfully too. I was recently trying to back up a project in UK based Crowdcube, but they quite oddly only accepted money from investors with a UK bank account. I found that slightly strange since it greatly limits the pool of potential mini-investors. There are plenty more crowdfunding sites, such as RocketHub, GoFundMe, Sellaband, Appbacker. Following Kiva’s example, a newcomer in this field is Watsi, that is helping to crowdfund healthcare projects particularily in Africa.
Which one is the right one for my project?
The suitability of a certain platform really comes down to project. Some platform suite better for certain goals. Inc. Magazine did a great infographic to help fund seekers to select their platform.