Peer-funding, micro-funding, fan-funding. Better known as crowdfunding, these strategies enable a collective of individuals to pledge or donate small amounts of money towards a common goal. The rise of social media gave crowdfunding a boost and catapulted it into the public consciousness. Industry research predicts that it will be worth US$5 billion worldwide in 2013.
By promoting campaigns through friends and social media channels, it is possible for project creators to spread the word outside their own networks and raise funds for a variety of projects, causes or business ideas.
Crowdfunding terms and methods have become familiar to many of us due to the amazing success of projects such as the Pebble watch.
Eric Migicovsky, a 25-year-old US entrepreneur, brought his Pebble E-Paper Watch concept to life via a phenomenally successful Kickstarter campaign after failing to raise sufficient venture capital. The watch displays information from a user’s smartphone. He set a target of US$100,000 and reached ten times that amount in two days in April 2012. By the time the campaign finished, nearly 69,000 individuals had backed it (effectively pre-ordering a Pebble) for a final total of US$10,266,844.
In April 2013, more records were set on Kickstarter with the funding of a Veronica Mars movie. Aiming to raise US$2 million, the campaigners were halfway there within five hours. On completion 30 days later, the campaign had raised over US$5.7 million and set the record for having more supporters than any other Kickstarter project. More than 91,500 people made it the highest funded project in the Kickstarter film category.
Crowdfunding is not new. Back in 1997, fans of Britain’s Marillion ran an internet campaign to bring the band to the US. They raised US$60,000 in donations to fund the tour. Music platform ArtistShare launched its fan-funded model for musical artists as early as 2001. The term crowdfunding was coined by US digital experimenter Michael Sullivan in 2006 when his videoblogging project, fundavlog, was in development.
Fast forward a few years to 2013, when Massolution, the research group of industry body Crowdsourcing.org, conducted its second annual research study into crowdfunding levels. It found that some 800 platforms raised more than US$2.7 billion worldwide during 2012. As a result, more than 1.1 million campaigns were successfully funded.
Although crowdfunding success stories capture the headlines, there are also examples of project creators who fail to deliver to their supporters, as the Sydney Morning Herald reported in May 2012 (http://goo.gl/IZZ9P). Currently platforms hold no legal responsibility if the project owner fails to deliver, and as crowdfunding becomes more widely accepted, governments need to consider legislation to protect consumers and investors.
I began my own research in February 2012 and learnt of the many and varied platforms using crowdfunding approaches. My enthusiasm grew as I discovered that crowdfunding existed not only for creative projects (like books and festivals in my own industry), but also for causes, social entrepreneurship and microfinance and business equity, among other purposes. The idea for the book was formed.
In March 2012, I began contacting a shortlist of platforms and drawing up questions. Focusing on 11 of the highest profile and most innovative platforms, Crowdfund It! includes details of their funding models, success rates and accessibility.
Although I am based in Sydney, Australia, I did not want to write a book about crowdfunding that solely focused on platforms available to Australians. The internet is worldwide and anything online that starts with territorial divisions tends to end up global. With that in mind, I have ensured you can tell which platforms are globally accessible and which are (currently) available only to certain countries.
Attached to each platform profile is an in-depth case study of a successful past campaign using the platform, including an interview with the project’s creator. The interview subjects have been generous in sharing their experiences, helping readers understand what it is like to run a project and providing guidance on how to ensure a campaign is successful.
Crowdfund It! also outlines key information on another 31 platforms to give you further ideas about who to work with on your own project.
During the months I spent researching and writing, I could see from the growth in the number and size of platforms, and the increased press coverage that accompanied it, that this method of fundraising was gaining popularity and interest.
It is clear is that crowdfunding has broad appeal as a way to fund a particular venture. While some may see it as a fad, the sector is expected to grow in the next few years. Not all platforms will be successful in capturing enough market share to be sustainable, though, so we can expect see some failures.
As the crowdfunding market becomes more successful and more crowded, it becomes harder for creators to get attention for their projects. When our Facebook and Twitter feeds are cluttered with numerous requests for support, how many will we pay attention to? And how many friends can we afford to support in realising their dreams? It will be even more important for creators to personalise their approach for funding to stand out in the crowd. As always, it will come down to the quality of the offering and the ability of the creator to market the project and themselves in new ways to capture our attention.
I, for one, am excited by the potential of harnessing the crowd and hope the information in Crowdfund It! inspires you to support the dreams of others or create your own project. The only limit is your imagination!