Crowdfunding is one of the more interesting (and important) neologisms of the last few years. It takes the idea of crowdsourcing (getting services delivered by crowds) and applies it to raising money.
In a later post I will write about the implications of the rise of crowdfunding for venture capital and other early stage funding sources. Here I will just cover some examples of crowdfunding, many of them in creative domains.
Kickstarter is a well developed creative crowdfunding platform, covering films, music, games, theatre, technology and far more. It uses the common all-or-nothing model, so projects are only funded if they raise their target funds in a defined period. It does not offer equity in the ventures, but project creators can provide specific rewards for funders. Kickstarter gained attention when the new open source competitor to Facebook, Diaspora*, sought $10,000 and has already raised over $180,000 before the funding period is over.
IndieGogo, originally providing crowdfunding for independent filmmakers, has diversified across other creative, environmental, and community endeavours. It offers a bonus of 5% of the funds raised if funders reach their goal, and also allows project creators to offer tax deductions to funders.
Sellaband provides a space for musicians to raise money, having already raised over $3 million for bands who want to record, tour, or promote their music. Bands can offer freebies, or sometimes a share in revenues.
ArtistShare has a similar model to SellaBand, providing fans a way to fund recording projects since 2003. Rewards include limited edition recordings, access to recording sessions, and liner credits.
Fashion Stake has already garnered significant publicity before its launch. The intent is to fund fashion designers and buy stakes in forthcoming collections in return for credits to purchase clothes. The site will also offer consumers voting on designs and the opportunity to share ideas.
MyFootballClub used a crowdfunding model to purchase English Conference National football team Ebbsfleet United, with the owners voting to manage the team. While initially the team was very successful in the field, many initial subscribers didn’t renew, so the team is currently experiencing financial problems. It is now using an ‘Adopt a Player’ system to raise funds.
Film crowdfunding is an active space. The climate change documentary The Age of Stupid was successfully crowdfunded, providing lessons on How to Crowdfund Your Film. When it was launched in 2006 I wrote about A Swarm of Angels, the venture that kicked off film crowdsourcing. While this project still isn’t off the ground, it has paved the way for similar ventures.
Buyacredit.com allows individuals to fund mainstream films in return for a name in the credit roll or additional perks. The teenagers behind the site created it to help fund making a film based on a Jules Verne story, however it is available for others to fund their projects.
Kiva uses crowdfunding for microfinance, providing loans in developing countries. This is a major success, having lent over $130 million so far. Since it lends to deserving entrepreneurs, once the funds are repaid the original lender can lend to another cause, donate the funds, or withdraw them.
ChipIn is a simple fundraising site which asks for donations for any purpose. It uses widgets to broaden the visibility of fundraising efforts.
My friend Charles Armstrong is using crowdfunding to raise £1 million in equity for his network analysis firm Trampoline Systems. He provides an overview of the process here. This is a great story which I will write about in more detail later.
NOTE: If you’re in Sydney and interested in this topic, be sure to come to Getting Results from Crowdsourcing event next 31 May in the evening.