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What is Crowdfunding

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Crowdfunding is a popular way of financing projects when other and more traditional methods do not work. Generally it works by someone pitching the idea for their project and then other people invest in the project raising the money that is needed. Crowdfunding relies heavily on online tools such as social media to draw people into the campaign. In crowdfunding there are two parties involved in the fundraising process and are known as creators and backers. The backers are the ones that pledge money to support a creator’s project goals while the creator is the person that creates a project or campaign and requests funds from the pledges that will make the project hit its set goal.

Types of Crowdfunding

Gofundme

GoFundMe which is headquartered in San Diego, California was launched in 2010. It was founded by Brad Damphousse and Andrew Ballester. Both were also the ones that founded Paygr which is a website dedicated to allowing members to sell their services to the public.[1] Since the crowdfunding site it raised over 3 billion in funds with over 25 million donors. GoFundMe is proclaimed as the world’s #1 personal Fundraising website. The mission of GoFundMe is to help raise money for campaigns like paying for healthcare, travel trips etc. On like other crowdfunding sites there is no penalties for missing goals, no deadlines or goals requirement and you get to keep every donation you receive.


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Kickstarter

Kickstarter was launched on April 28, 2009 which is based in Brooklyn New York was founded by Perry Chen, Yancey Strickler, and Charles Adler. Since Kickstarter have started it has processed over 100,000 projects. Kickstarter was created to help artists, musicians, filmmakers, designers, and other creators find the resources and support they need to make their ideas a reality. Kickstarter requires that project creators deliver the project's end goal or product to potential backers. If the fundraising goal is not reached the investors will get their pledge fund back. [2]

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Indiegogo

Indiegogo is another crowdfunding site that was founded in 2008 by Danae Ringelmann, Slava Rubin and Eric Schell. Its headquarters are in San Francisco, California. The mission of Indiegogo is “to empower people to unite around ideas that matter to them and together make those ideas come to life”.[3] On like other crowdfunding sites projects hosted on Indiegogo are not required to meet fundraising goals, but are still subject to fees for using the service.

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Pros and Cons of Crowdfunding

Pros of Crowdfunding

1. Anyone who has access to the internet and a bank account or credit card can participate in crowdfunding.

2. You can get feedback early-on in the innovation process through the comments section of your projects and on updates.

3. You do not have to give away equity in your business or intellectual property rights.

4.You can take advantage of your backer’s social media clout to help spread the word about your new project and reach new customers.

5. It will feel good to give funds to project that you believe in and see it do well but it is also a good tax write off when you give to a non profit organizations.

Cons of Crowdfunding

1. You need to actively promote your project constantly , you just can't sit around and expect strangers to stumble on your crowdfunding campaign and back up.

2. If you fail to hit your fundraising goal, it may affect the moral of your teammates or backers.

3.It is very easy for other entrepreneurs to copy your ideas if you haven’t protected them.


4. Even though the campaign is free to start up you must pay a (5%-15%) fee if you were to host a campaign on one of the crowdfunding sites. [4]

Famous Crowdfunding campaigns

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Azel Prather Jr needed $300 for a plane ticket to go to Miami so he could save his relationship because his girlfriend and her friends went to Florida for spring break. So on march 10,2015 because he had no funds he created a crowdfunding campaign so he could get the money and save his relationship. His campaign was a success because a lot of people helped him out and in the end he was able to achieve his goal of $300 plus more to go to Miami to save his relationship[[5]]

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In 2015 Kyle Douglas from Chicago got very worried about his favorite actor Matt Damon after he watched "The Martian" and he wanted Matt to come back home safely from Mars after his crew left him on the red planet after an accident had happen.The crew thought he was dead and mistakenly left him on the planet. All the concerned fan wanted was to raise money so his favorite actor could make it back home and make another Bourne movie. unfortunately 20 hours after the campaign was created no one funded the $99 million it would take to bring Matt home. in the end even thought the campaign was a joke it did go viral making the world know about it [[6]]


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Kanye West let loose with a series of tweets earlier this month, claiming to be $53 million in debt. On February 15, 2015 Jeremy Piatt a concerned fan launched a GoFundMe campaign to help him out. Within 24 hours, Piatt's campaign had raised about $25 towards the cause. With a bit of a push from social media, the total climbed to $289 the following day. And 10 days later the fund had reached nearly $8,000. Even though the fan was just trying to help out his favorite artist in the end Kanye turned down the money that was raised and the money was sent back to the backers.

List of top 10 ranking Crowdfunding sites

1.GOFundMe

2.Kickstarter

3.Indiegogo

4.Teespring

5.Patreon

6.YouCaring

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7.crowdrise

8.DonorsChoose

9.Kiva

10.Giveforward

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References

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