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CrowdFunding? What's That? - CrowdFundingPlanning.com - CFP

posted Apr 3, 2013, 1:56 PM by David Khorram   [ updated Apr 5, 2013, 4:18 PM ]

Crowdfunding is a relatively new concept and therefore may need some explaining. 

Here’s what I have come up with.

The general public make projects happen by collectively pledging money to a particular idea or individual. 

Crowdfunded projects can be almost anything. Games, films, music, art, design, technology, inventions, community projects, charity fundraisers and more.

Ok so definitions are useful, but rarely universally accepted or applicable. There are many different types of crowdfunding but in principle that’s the general gist.

Example time.

Adam has an awesome idea. It’s a credit card sized device that folds out into a USB phone charger, so you can always have your phone charger with you. He has no means to make it happen, and doesn’t want to take out a bank loan with hefty interest rates, or be forced to give up any ownership of his idea in exchange for money from an investor. Adam decides to crowdfund

He puts up a video on a website called Kickstarter explaining his idea, showing off a prototype and talking about how he hopes to make it happen. Visitors to Kickstarter see his video, dig his idea and donate some money to help bring it to life. 

And the example I’ve just given is a real life example too, because Adam and his friend Noah brought the Charge Card to the market after raising over $160,000 using crowd funding. 

You’ll also get crowdfunding campaigns set up for people who want to improve their lives, pay medical bills, travel the world etc. So sometimes you’re funding an inspiring individual or community, not just their idea.

Some FAQs

What do people get in return for pledging (backing)?

There’s often a tiered rewards system. The more you give, the more you get. For small donations ($5 or so) you might get a personal thank-you post card from the project’s creators as well as all the latest news from the project as it progresses. Pledge a bit more and you’re likely to get your hands on the product itself before anyone else once it’s gone into production.

Rewards are often pretty quirky too. If you back an independent movie for example, your reward might be your name in the credits as an executive producer. It’s been known to happen like that.

I still don’t get why I would donate money to a stranger on the Internet with a crazy plan. What other perks are there to backing campaigns?

You get to be a part of something awesome. You and your fellow backers get the satisfaction of bringing something that inspires you to fruition, something that wasn’t there yesterday. You get to help creative people with great ideas quit their day jobs and produce more awesome stuff. And you get said awesome stuff before everyone in your class/office/family even knows that it’s a thing yet. 

What are the risks?

The big risk for the creator of a crowdfunding campaign is that it’s possible no one backs your campaign. Either your idea isn’t as inspiring as you thought it was, it’s too similar to another idea or you just don’t make a great job convincing people to back your idea. It’s time consuming, hard work and can be a crushing blow if it falls flat. 

The big risk for a backer is that the creator doesn’t manage to get the product to market for whatever reason. Production costs go up overnight, co-founders quit and take their designs with them, a patent fails etc. If that happens, you’re unlikely to get a refund on your pledge, because essentially you’re buying into an idea not ordering a product.

Where can I see some of these projects?

Check out Kickstarter and Indiegogo, these are the two biggest and most exciting platforms. You’ll find hundreds of inspiring campaigns from cool inventions to compelling personal stories. Backers’ also loves Microryza who crowdfund scientific research, because science rules.

Backers.co covers new and trending campaigns as well as breaking news and exclusive interviews from the crowdfunding world, that’s kind of our thing. So do stop by!

What other types of crowdfunding are there?

Too many variations to mention, seriously. But the other big one is equity crowdfunding where, instead of rewards schemes backers actually get to own a stake in the company such as stocks and shares. It’s a huge, huge deal for startups and we’ve only just begun to scratch the surface in terms of what this means for business.

Backers’ however doesn’t cover a lot of equity based crowdfunding campaigns because a lot of the work happens behind closed doors. It’s less audience driven and often investors have to be accredited which is less exciting.

I hope that helps. Lets check out some of the new and exciting developments in the world of crowdfunding


Posted from: http://backers.co/what-is-crowdfunding

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