Crowdsourcing is an industry buzzword gaining mainstream attention. A group of people connected by technology and common goals can endeavor in challenges too complex for a single entity. Together, they overcome big problems. In a similar way, crowdfunding applies this idea to venture capital.
Crowdfunding is an investment. It is an almost direct transfer of wealth for shared ambitions. Websites exist to facilitate this process. Some of the most popular include GoFundMe, Kickstarter, and RocketHub. Everyday people turned investors navigate these websites to find interesting and meaningful projects. There are no promises of success or even production.
But the sense of community involvement adds excitement. And with risk dispersed widely, innovation can occur at a microscopic level. Some key products demonstrate the power of crowdfunding. Ouya is a $99 video game system that plugs into a television with native 1080p display. On Kickstarter, it raised its stated goal of $950,000 in eight hours. A month later and the revenue summed to $8.5 million. Another example is Soylent. Soylent aims to be a nutritionally complete, liquid meal replacement optimized chemically for human digestion. It has currently raised $750,000 against its goal of $100,000. Star Citizen, an upcoming persistent starship combat simulation to be played on computers, has raised an astounding $35 million in crowdsourced funds.
People give because they see value in the product. They enjoy feeling personally responsible in helping products launch. But all things being equal, campaigns that provide meaningful incentives to contributors have a much higher chance of success. Incentives range from the expected, such as a credit line listing or a final product, to the more amazing, such as exclusive products, personalization, trips, workshops, private access or lifelong perks.
Crowdfunding, however, does not represent a magical source of limitless money. Of all the projects started, only 30% ever reach their funding goals. Of these, even fewer succeed. Presentation, networking, and know-how are just as important as ever. Each of the different crowdfunding platforms have their own nuances. Review all legal and moral obligations before launching your own campaign.
Crowdfunding is increasingly popular. Many variations have cropped up. Sites such as Givelocity pool money together for stronger charitable giving. Other sites like Patreon establish a modern day patron/artist relationship. There are still others that are targeted just for bands or other occupations. But whatever it is that you’re looking for you, you can be sure to find a project or platform that fits your purpose. And chances are good that you’ll find other people looking as well.
Published on December 11, 2013