Source: Crowdfunding: Where Dollars and Dreams Meet
Crowdfunding is the collective effort of individual donors or investors who pool their financial resources, typically online, to help fund or start a business, project or cause.
– Projects funded through sites like Kickstarter are posted with a financial goal and timeline. People make pledges for projects they want to support.
– When projects reach their financial goals, they are funded.Crowdfunding sites
– Popular crowdfunding sites include Kickstarter, GoFundMe, Wefunder, Start Some Good, Rocket Hub, Rock the Post and Indiegogo are a new way for entrepreneurs to raise capital for businesses and projects.
– Other crowdfunding sites like Go Fund Me are funded as they go, where people visiting the site pay immediately.
– Since its launch in 2009, Kickstarter has launched more than 92,000 creative projects in 13 categories (e.g., music, film & video, art, technology).
– On Kickstarter, 39,000 projects being successful funded for a success rate of nearly 44%.
– More than 3.7 million people have pledged more than $554 million in funding through Kickstarter projects.
– When the JOBS Act is enacted, sites like Wefunder can fund start-ups, giving the average consumer the opportunity to invest in a startup company for as little as $1,000.
– Currently, nearly 15,000 investors plan to invest more than $43 million in new companies through WeFunder.
– Start Some Good focuses its crowdfunding model on social change initiatives for projects involving education, social awareness, employment training and social enterprise.
– The average successful crowdfunding campaign raises about $7,000, lasts 9 weeks and achieves 30% of its goal within the first week of its launch.
– Social media and outside links are critical to the success of crowdfunding projects.
– Who uses crowding: creators and funders
– Consumers between the ages of 24 and 35 (Millenials) are much more likely to participate in crowdfunding than a consumer over the age of 45.
– Men are more likely than women to take a risk on a startup.
– People making more than $100,000 a year are the most likely to invest in a startup through crowdfunding.
– Rock The Post, a crowdfunding site focused on revenue-generating businesses, accepts only projects it considers likely to get funded – approximately 10%.
– The U.S. Small Business Administration recognizes “crowd sourced capital” as a legitimate stream of capital for starting a business.
Case Studies– Kickstarter: Veronica Mars movie project: 69,372 backers, goal $2 million, money raised $4,600,481
– Kickstarter: Double Fine raised $1 million in 24 hours from their fans to create more “point and click” games.
– Indiegogo: Books of Wonder, the oldest and largest independent children’s bookstore in New York City, raised $100,000 via crowdfunding to save the store.
– SoMoLend: Unable to obtain traditional financing, Hyde Park Body Boutique in Cincinnati raised $9,000 on SoMoLend to remodel her studio, hire additional trainers and launch an indoor cycling class.
– In 2011, over $1.5 billion was raised via crowdfunding around the world. In 2012, crowdfunding raised $2.8 billion.
– In April 2012, 452 crowdfunding sites were operated worldwide.
– In 2012, $2.7 billion was raised on crowdfunding sites with $1.4 billion on donation and reward-based platforms and $1.2 billion on lending-based crowdfunding platforms.
Crowdfunding vs. Venture Capital– Women currently raise 5% of investment capital. That is expected to rise when equity-based crowdfunding is allowed through the JOBS Act.
Crowdfunding vs. Venture Capital Pros & Cons– Venture capitalists are more stable than crowdfunding resources.
– Crowdfunding allows for greater creativity.
– Crowding is a lower cost alternative for companies that can’t afford expensive IPOs which start at $250,000.
– Under the JOBS Act, entrepreneurs can raise capital up to $1 million through crowdfund investing (CFI), with unaccredited investors investing up to $2,000 of their own money.
– Venture capitalists, or angel investors, will be able to raise beyond limits allowed by the JOBS Act.
Why Crowdfunding Works– People innately want to help others, and crowdfunding is an easy way to support a creator, cause or project at an affordable price point.
– Entrepreneurs offer funders rewards – pre-order opportunities, merchandise, contributor credit and exclusive events are just some of the options.
– Crowdfunding helps projects and businesses get started that wouldn’t be funded by other, more traditional means (e.g., bank financing, venture capital, bootstrapping).
– Why people fund projects: support creators and causes, engage and contribute to a creative community, receive rewards.
