Crowdfunding

Crowdfunding is the collective effort of individuals to pool financial support for the efforts initiated by other people and organizations via the Internet. It has proven to be a great asset in sourcing potential customers and increasing an audience, offering a better chance at success. In 2012, the crowdfunding market was $2,806 million, and has since experienced a double digit growth over the previous three years (source: MarketingCharts.com).

There are three types of crowdfunding platforms:

equity

 

debt

 

rewards and philanthropy

Investors receive a stake in the company.
(Implemented by the SEC under the JOBS Act)

 

Investors are repaid for their investment over a period of time.

 

Investors receive a tangible item or service in return for their funds.

   

Circle Up

Funders Club

WeFunder

Angel's List

 

Kiva Zip

Prosper

UpStart.com

 

Kickstarter

IndieGoGo

Rockethub

Onevest

How does it work?

  1. Create an online profile that contains relevant information about your project
  2. Set a goal of money and fixed number of days for your campaign
  3. Utilize social media and online networks to ensure goal is reached

Why choose crowdfunding?

  • Presents a low cost approach to raising initial funds
  • Provides a testing ground for the marketability of your startup
  • Gives access to potential financial backers around the world

By creating a compelling story that draws readers, people are inclined to support ideas for the following reasons:

  1. They connect to the greater purpose of the campaign
  2. They connect to a tangible aspect of the campaign like the rewards
  3. They connect to the creative display of the campaign’s presentation (source: forbes.com)

Benefits

  • Can be fast, low cost way to access some initial funding
  • Offers a credible platform to promote a venture without a dedicated website
  • Serves to test the strength of your appeal and execution of your plan

Drawbacks

  • Requires strong online engagement (versus face-to-face investor meetings) Limited to small investment rounds
  • Fees may be deducted from any revenues or profits earned
  • Potentially requires “perks” for investors that require time and attention to coordinate

Additional Resources

Crowdfunding for Nonprofits (SSIR)

Crowdfunding for Nonprofits: 4 Tips for Impact Fundraising on Indiegogo (Fast Forward)

5 Things to Consider Before Launching a Crowdfunding Campaign

How to Use Crowdfunding

Finding Philanthropy: Like it? Pay For It

Crowdfunding and Taxes: What You Should Know

“The Future of Crowdfunding”: A Technica.ly podcast on how to successfully raise money and attention from the crowd

“What is CrowdFunding? Why, when and how to crowdfund:” A YouTube video on the process of campaigning

Resources from Indiegogo:
Examples of successful social venture crowdfunding campaigns: